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Home loan jargon, translated

Bayley Clarke · Mortgage broker on the road · Last checked 7 September 2026 · 12 min read

The short answer

Most home loan jargon is a plain idea wearing a fancy word. Serviceability means can you afford the repayments. Notional rent is rent you don't pay. Clawback is money the bank takes back from me, not you.

This page is every term that comes up on my calls, translated into the sentence I'd actually say to you, with the trap each one hides. Skim the group you're in, or use the links to jump straight to the word that's bugging you. Where a term has its own full answer on the site, the link takes you down a level.

Why the words matter

Banks don't use jargon to sound clever. They use it because each word is a rule, and the rule moves money. "Serviceability" decides how much you can borrow. "Peak debt" decides whether a bridge gets approved. "Scheduled balance" decides what your new loan looks like after a switch. Learn what the word means and you can see the rule behind it, and once you can see the rule, you can ask which lender applies it differently. That last bit is most of my job.

The groups below run in the order the words tend to show up: before you apply, during the deal, when you're moving house, once you're living with the loan, and when you're thinking about leaving. Jump to a group: before you apply · the deal · bridging and moving · living with the loan · refinancing.

Before you apply

Serviceability. Can you afford the repayments. That's it. Every lender runs your income against your debts and living costs, with a buffer on top of the rate, and the number that falls out is your borrowing power. I said "serviceability" zero times in a month of calls, because the plain version is the useful one: it's an income versus expense conversation. The trap is thinking equity or a big deposit counts. They don't. How much can I actually borrow is the full version, and why is my borrowing power so low is what to read if the number disappoints you.

Buffer, or assessment rate. The bank doesn't test you at the rate you'll pay. It adds a margin on top, generally 3%, and tests whether you could still pay at that. Some lenders use a smaller buffer as their everyday setting, and most run a reduced-buffer path for clean refinances, which is why the same loan gets a yes at one bank and a no at another. The trap: a perfect repayment history doesn't enter the test. It's today's income at tomorrow's rate.

HEM. The Household Expenditure Measure. A table of what a household like yours is expected to spend, by income, relationship status and kids. The bank compares your declared expenses to it and uses whichever is higher. So a frugal budget doesn't help, and a loose three months of statements hurts. Every $100 a month of expenses knocks roughly $15,000 to $20,000 off what you can borrow. Why the bank ignores your budget, and the three-month tidy-up that fixes it.

Genuine savings. Deposit money the bank can see you saved yourself, over time, in your own name. The usual test is a balance held or growing in your account for at least three months. A gift from your parents, money sitting in their account, or the proceeds of selling a car generally don't count on their own, which matters most when your deposit is under 10% and the loan is above 90% of the value. The trap is timing: every month the money sits in someone else's name is a month the clock hasn't started. Savings in your parents' account walks through the two fixes, and the government 5% deposit scheme carries its own genuine savings rule regardless of the loan size.

Notional rent. Rent you don't pay, counted anyway. If you live at home rent free and you're buying an investment property, most lenders add a rent line to your expenses, around $150 a week, because nobody stays in their parents' spare room for thirty years. It's not a charge and nobody takes it off you. It shrinks the loan, not the repayments. The opportunity: the figure is a policy setting, not a law, and a small number of lenders apply nothing at all. The full notional rent answer, including when it doesn't apply.

LVR, and LVR tier. Loan to value ratio: your loan divided by what the property is worth. Owe $480k on a place worth $600k and you're at 80%, which is the standard mortgage. Banks price in bands from there. 70, 60 and 50 sit below and cost a little less. 90 and 95 sit above, with higher rates, extra fees and mortgage insurance. The trap is the word "worth". It's the bank's valuation, not the agent's number, and the two can be $50k apart. LVR tiers, and getting revalued into a lower one.

LMI. Lenders mortgage insurance. Insurance the bank makes you pay for so the bank is covered if it has to sell your place at a loss. It protects them, not you. It kicks in above 80% of the property's value, slides up as the deposit gets smaller, and on a 95% loan can land anywhere from 20 to 30 grand. Nobody publishes a rate card, so every online calculator disagrees. The three exits to check before paying it: an occupation waiver, the 5% scheme, or a guarantor. What LMI costs, and whether to pay it or keep saving.

Comparison rate. The advertised rate with most of the fees folded in, worked out on a standard loan size over a standard term so two products can be lined up side by side. Useful for spotting a cheap-looking rate that's carrying a heavy fee. The trap is the word "standard": the calculation assumes a loan far smaller than most people borrow, so on a bigger loan the fees matter less and the rate matters more, and the comparison rate overstates the gap. Treat it as a smell test, not the answer. The answer is the total cost on your actual balance over the years you'll actually hold the loan.

The deal

Pre-qualified, pre-approved, conditional, unconditional. Four different yeses, and they get used loosely. Pre-qualified is my yes: I've verified your income, read your statements and understood your credit file, and I'm confident. Pre-approved is the bank's yes before you've found a property, and it generally lasts 90 days. Conditional is the bank's yes on a specific property, subject to a few boxes: the valuation, a document, sometimes a debt paid out. Unconditional, or formal approval, is the bank signed off on everything. The trap: agents say pre-approved when they mean pre-qualified, and only formal approval lets you sign an unconditional contract. What the stages actually mean.

Subject to finance, subject to building and pest, cooling off. The conditions on your offer. Subject to finance means if the bank doesn't approve the loan, you can walk away with your deposit. Building and pest is the same escape hatch for the inspection. Cooling off is the short window after signing, in the states that have one, where you can pull out for a small penalty. They're your protection, and there's pressure to drop them so your offer looks cleaner. Only drop a condition once the thing it protects you from has actually been done. How to make an offer, and who the agent works for.

Valuation versus appraisal. An appraisal is the agent's read on what your place would sell for today, free, half an hour, and also a pitch for your listing. A valuation is the bank's number, done by an independent valuer or one of the bank's desktop systems, off settled sales data that lags the market. For anything loan related, only the valuation counts, and there's no appeal to the agent's figure. The trap is building your refinance plan on the appraisal and getting a valuation $60k under it. Which one counts, and why I run the bank's tools before anything goes on your file.

Deposit bond. A piece of paper that stands in for the cash deposit on the contract. You pay a small fee to a bond provider, the agent and conveyancer accept it as the deposit, and the real money arrives at settlement. It earns its keep on guarantor loans, where the bank lends the whole purchase and you don't have 5% or 10% sitting there, and on bridging, where your deposit is locked in the house you haven't sold. The trap: a bond fixes a timing problem, not a deposit problem. The money still has to exist somewhere. What a deposit bond is.

Exchange versus settlement. Exchange is the point of no return: contracts swapped, deposit in trust, you're locked in and so is the seller. Settlement is the day the money moves, generally 30 to 60 days later, when the bank funds the loan and the keys are yours. The order differs by state, but the idea is the same. The trap is exchanging on a pre-approval and hoping formal approval lands in time, which turns the wait into a race with real penalties at the end of it. Exchange versus settlement, and why the hard work belongs before exchange.

Rate lock. A fee you pay so the bank can't change your fixed rate between application and settlement. Without one, most banks give you whatever the fixed rate is on settlement day, not the one that made you apply. It's a bit cheeky, charging you to keep the promise you thought they'd made, but on a long settlement it takes the guesswork out. Some lenders honour the rate from approval for free. The trap is paying for a lock at a bank that gives you one anyway. What a rate lock is, and whether to pay for one.

Bridging and moving

Bridging finance. A loan that lets you buy the next place before you've sold this one. The lender funds the whole new purchase, you own two properties for a few months, and the sale proceeds pay the bridge down when your old place goes. You pay a bit of a premium as a cost of convenience, for the luxury of buying before you've sold. Some lenders want interest paid monthly during the bridge; others add it to the loan and take it out of the sale. Neither is free. Do I make repayments during bridging, and do I have to sell first.

Peak debt and end debt. The two numbers inside every bridge. Peak debt is the most you'll owe: your existing loan, plus the whole price of the new place, plus the buying costs, all on the day you settle the purchase. End debt is what's left once your old place sells and the proceeds come off. The peak is often more than double the end debt. The trap is which one the lender tests you on. Some assess your income against the peak, as if you'd carry it for 30 years, and most households fail. Others test the end debt. Same family, same two houses, opposite answers. Peak debt versus end debt, with the worked example.

Subject to sale. An offer that only becomes firm once your current place sells. Perfectly legal, and owners accept them all the time, but they sit at the bottom of the pile when there's another buyer without the condition, because the seller's sale is hostage to yours. The trap is dropping the condition to look stronger without having the bridging approval or the cash to carry two properties. Can I make an offer before I've sold, and the three alternatives.

Capitalised interest. Interest added to the loan balance instead of paid out of your pocket. It shows up in bridging, where no repayments during the bridge feels like a saving, and in LMI, where the premium gets added to the loan instead of paid at settlement. Both are real money. Capitalised bridge interest comes straight out of your sale proceeds, and a capitalised premium is a once-off fee you pay interest on for 30 years. The word to watch for is "capitalised", because it always means "added to what you owe".

Living with the loan

Offset versus redraw. Two ways of parking savings against your mortgage so you pay less interest. An offset is a separate account that sits next to the loan: every dollar in it offsets the balance, you can bucket money across several accounts and spend from a debit card, and it usually comes with a fee. Redraw is money paid straight onto the loan that you can pull back later, usually on a cheaper, no-frills product. Think of the offset as your new savings account: because it's interest saved rather than interest earned, there's no tax on it. The trap is the property becoming a rental one day, because pulling money out of redraw is new borrowing in the accountant's eyes and offset keeps that clean. And the one wrong answer on the whole page: a home loan with savings sitting in a separate bank earning a little interest. Just stop. Offset, redraw or savings account.

Available balance and scheduled balance. Balance is what you owe. Available is your redraw: the extra repayments and lump sums you've put in that the bank will let you take back out. Scheduled balance is the two added together, which is where the loan would be if you'd only ever paid the minimum. Loan says balance $420k, available $35k: you owe $420k and you're $35k ahead. The moment it matters is a switch, because the new lender needs to know whether to set the loan up at the balance or the scheduled balance, and those are two different loans. Is the available balance really money I can spend.

Negative equity. Your property is worth less than you owe on it. Worth $430k, owe $450k, you're $20k under. It happens when values fall after you buy, and it's more common when you started with a small deposit. The bank can't do anything about it and won't, as long as you keep making the repayments. They've already given you the money. It's a line on a statement until you need to sell or refinance before the value comes back, and that's the one thing worth planning around. What negative equity is, and what happens if prices fall after a 5% deposit.

Revert rate. The variable rate your bank puts you on the day a fixed rate ends, if you do nothing. Pretty much whatever they decide that day, and it's often a lot higher than what the same bank is offering new customers. Nobody rings to ask. The letter arrives, the repayment changes, and plenty of people don't notice for months. The fix is a three-month window before expiry: ask your bank in writing what it'll offer, look at the market, and have a switch approved and timed for the day after, if the numbers say so. My fixed rate is ending, what should I do.

Break costs. What a bank charges to leave a fixed rate early. It's the bank recovering what your fixed rate cost them to fund, so it can be trivial or thousands depending on how rates have moved since you fixed. On a variable rate there's no equivalent and no minimum stay: you can refinance, sell or pay out whenever you like for a standard discharge fee. The rule: never break a fixed rate without the figure in writing first. Can I refinance later, or am I locked in.

Refinancing

Reprice. Asking your existing bank for a discount on your rate. Same bank, same account, lower rate, nothing on your credit file, no cost. That can be me on your behalf or you ringing the retention team yourself. It's free money on the floor, and it's always step one, because the bank would rather hand out a discount than lose the loan. A refinance only happens if the reprice doesn't get you to where the market is. If a broker's first move is always a refinance, ask why. Repricing versus refinancing, and how the retention call goes.

Clawback. The terms on which your broker was paid. When a loan settles the bank pays me a commission. If the loan is repaid or moved inside 12 months, the bank takes every dollar of that back, and generally half of it between 12 and 18 months. None of it is charged to you. It's between the bank and me. What it means in practice is a broker who sets you up with a loan you leave in six months worked for free, which is a fairly strong incentive to get it right the first time, and why I'd rather hear about a change from you than from the discharge team. Minimum stay and clawback, and how a broker gets paid.

Discharge. Paying a loan out and releasing the bank's mortgage from your title, whether you're selling, refinancing or you've cleared the balance. The old bank charges a discharge fee and there are small government fees to release the old mortgage and register the new one. That's most of the $1,000 to $1,200 I budget for a switch, per property. The trap is the discharge team: they're also the retention team, and ringing them is how a reprice starts. What refinancing actually costs.

Every one of these words is a dial a lender sets for itself. The buffer, the notional rent figure, which debt a bridge is tested on, whether the LMI premium sits inside the cap or on top of it. A branch can only show you its own setting. Seeing all of them at once, and knowing which lender's setting suits your situation, is the whole job. Refinancing with a broker is that idea applied to a switch, and how to buy your first home is the same idea applied to a purchase.

The questions, one by one

Each definition above has a full answer underneath it, in the order the words tend to come up. Find the one that's yours and go down a level.

I live rent free with family. Why does the bank add a rent expense?

Notional rent. It only applies when you're buying somewhere you won't live, the figure differs at every lender, and a few apply none at all.

Why does the bank ignore my actual budget?

HEM. The bank uses the higher of what you declare and the benchmark, so a frugal budget doesn't help and a loose one hurts. Tidy up three months before you apply.

What's an LVR tier, and can I get revalued to drop into a lower one?

Banks price in bands: 80% is standard, 70, 60 and 50 sit below, 90 and 95 above. Growth or a renovation that drops you a tier can get you repriced without moving.

What is lenders mortgage insurance, what does it cost, and can I add it to my loan?

Insurance that protects the bank, not you. Nobody publishes a rate card, the cost slides with your LVR, and three exits are worth checking before you pay it.

Can I use money sitting in my parents' account as savings?

Not while it's in their name. Genuine savings means your account, for at least 90 days. Gift it across now and let the clock start.

Pre-qualified, pre-approved, conditional, unconditional: what do the stages actually mean?

My yes, the bank's yes before the property, the bank's yes on the property with boxes to tick, and the bank signed off on everything. Only the last one lets you go unconditional.

How do I make an offer, and who does the agent work for?

The seller. Know your number first, then price plus conditions in an email. Subject to finance and building and pest are your protection, so only drop them from strength.

Bank valuation or agent appraisal: which one counts?

For anything loan related, the bank's valuation. The agent reads today's market; the bank reads settled data that lags it. Only one of them moves your loan.

What is a deposit bond?

A piece of paper that stands in for the cash deposit until settlement. Earns its keep on guarantor loans and bridging. Fixes a timing problem, not a deposit problem.

Exchange versus settlement: what does each one actually mean?

Exchange is the point of no return. Settlement is when the money moves, generally 30 to 60 days later. Get approved before exchange and the rest is a waiting game.

What is a rate lock, and should I pay for one?

A fee so the bank can't change your fixed rate before settlement. Some lenders lock at approval for free; for most, it's pay the fee or leave it to chance.

Do I make repayments during bridging finance?

Depends on the lender. Some want interest paid monthly on the peak debt; others capitalise it and take it out of the sale. Neither is free, and a slow sale is what makes a bridge expensive.

Can we afford to buy before we sell? (peak debt vs end debt)

Peak debt is everything you owe while you own both. End debt is what's left after the sale. Which one the lender tests you on decides whether the bridge happens at all.

Can I make an offer before I've sold my place?

Yes, subject to sale. Those offers sit at the bottom of the pile, and the three alternatives are bridging, selling first, or a same-day settlement.

Offset, redraw or savings account: where should my money sit?

Offset or redraw, either one. Leaving it in a savings account next to a home loan is the only wrong answer. One warning if the place might become a rental.

Is the available balance on my home loan really money I can spend?

Yes, in most cases. It's your redraw. Balance is what you owe, scheduled balance is where you'd be on minimum repayments, and the gap matters most when you switch.

What is negative equity?

Your property is worth less than you owe. The bank can't and won't do anything while you're paying. It's a line on a statement until you need to sell or refinance.

My fixed rate is ending in a few months. What should I do to get ready?

Start three months out. Do nothing and you roll to the revert rate. Ask your bank in writing, look at the market, and have the switch ready for the day after expiry.

Repricing versus refinancing: which one should I do first?

Reprice first. It costs nothing and can be free money on the floor. Refinancing is the full move, and it only happens if the reprice doesn't get you there.

Do I need to stay with my bank for a minimum period, and what does clawback mean?

No minimum on a variable rate. Clawback is the bank taking the broker's commission back if you leave inside 12 to 18 months. It never costs you anything.

The honest part

Three of the words on this page don't have a full answer of their own yet: genuine savings, serviceability and comparison rate. The definitions above are drawn from the lender policy books I work from and from what I say on calls, not from a video, and they'll get their own pages when I've recorded them. If one of those three is the exact thing you're stuck on, the call is quicker than the wait.

The other honest bit: a definition is general, and your lender's version of it is specific. "Genuine savings" is three months at most lenders and a different test at a few. "Buffer" is generally 3% and quietly smaller at some. The word tells you the rule exists. It doesn't tell you which setting you'll be assessed on, and that's the part that moves the number.

Got a word the bank used that isn't here?

Send it to me and I'll add it, or book a call and I'll translate the whole letter. Thirty minutes, plain English, and I'll tell you which of the rules behind the words actually matters for your situation.

Book a 30 minute call Call 0437 189 939

No application, no credit check, nothing on your file. Just the translation.

Common questions about home loan jargon

What does serviceability mean on a home loan?+

Whether you can afford the repayments. The lender runs your income against your debts and living expenses, with a buffer on top of the interest rate, generally 3%, and the loan size that passes is your borrowing power. Equity and deposit size don't enter it. It's an income versus expense conversation.

What is notional rent?+

A rent expense the bank adds to your assessment when you live rent free with family and you're buying a property you won't live in. Most lenders use around $150 a week, a few apply nothing at all. It isn't a charge and it doesn't change your repayments. It reduces the loan size, and the lender you pick changes how much.

What is the difference between offset and redraw?+

Both park your savings against the loan so you pay less interest. An offset is a separate account next to the loan with a debit card and the option to bucket money, usually with a fee. Redraw is money paid straight onto the loan that you can take back out, usually on a cheaper product. Pick the offset if the property might become a rental one day, because pulling money out of redraw counts as new borrowing.

What is clawback on a home loan?+

The bank taking back the commission it paid your broker if the loan is repaid or refinanced early: all of it inside 12 months, generally half between 12 and 18 months. It's between the bank and the broker and is never charged to you. On a variable rate there's no minimum period you have to stay.

What is peak debt in bridging finance?+

The most you owe during a bridge: your existing loan, plus the full price of the new property, plus the purchase costs, on the day you settle the purchase. End debt is what's left once your old home sells. Some lenders test your income against the peak, others against the end debt, and that choice decides whether the bridge is approved.

What counts as genuine savings?+

Deposit money you saved yourself, in your own name, held or growing for at least three months at most lenders. Gifts, money in a parent's account and the proceeds of selling something generally don't count on their own. The requirement bites hardest above 90% of the property's value and on the government 5% deposit scheme. Move the money into your own account early so the clock starts.

Next question

I live rent free with family. Why does the bank add a rent expense?

The definition people search for most, in full, with the lender-by-lender opportunity underneath it.