Finance lingo,  what does it mean? Here are the top 10 things you may hear throughout your journey

LVR

Loan-to-Value ratio

This is a calculation done by dividing the amount of the mortgage by the value of the home. Lenders will generally require the LVR to be at least 80% in order to qualify for a mortgage without added fees.

LMI

Lenders mortgage insurance

Insurance which covers the lender if a borrower defaults on a loan and the sale of the property doesn’t cover the outstanding debt. It’s usually required for the loans the lender considers more risky. For example, when the amount borrowed is over 80% of the property value. This insurance offers no protection to the borrower but rather covers the lender in case of default.

FHOG or GSG

First Home Owners Grant or Great Start Grant

Formerly known and commonly referred to by old school lenders as the first home owners grant, the great start grant is a one off payment by the government to any first home owner buying or building brand new or off the plan homes.

Caveat

A caveat lodged upon a land or property title indicates that a party, that is not the owner, claims some right over or interest in the property.

Guarantor

A person or organisation that agrees to be responsible for the payment of a loan – if the actual borrower defaults or is unable to pay the loan.

Offset

A separate account that attaches to your home loan. Any money sitting in the account saves interest on the home loan. For example: 250k home loan, 50k in offset account, you only pay interest on 200k.

Redraw

To ‘redraw’ is to remove excess money from your loan and is generally only available on a variable rate loan.

If you have been making extra payments into the loan you have the ability to pull out any of the money that you have paid over and above your repayments.

Package

A ‘package’ generally refers to a special offer that a bank may have which may offer discounted interest rates or benefits on other products such as: credit cards,  insurances and accounts. Agreeing to a package does not mean you need to open all products included in the package, ensure you do what is best for your own situation.

Stamp duty

A State Government tax based on the purchase price of the property. It is calculated as a one off fee,  payable at the time your loan settles or 30 days after the finance is approved (whichever is first) This can be waived for first home owners.

Calculate your stamp duty here: http://stampduty.calculatorsaustralia.com.au/stamp-duty-qld

Default

Failure to abide by the terms of a mortgage or loan agreement – such as not making loan minimum required repayments. Defaulting on a loan may result in financial penalties and, in extreme cases, the mortgage holder taking legal action to repossess the mortgaged property. You can default on a credit card,  personal loans and home loans.