Learning
Plain-English lending guides to help you make better finance decisions.
The better you understand lending, the better decisions you can make.
Most borrowers do not need complicated finance jargon. They need clear explanations of how lenders think, what affects borrowing capacity, and what to prepare before applying. These guides explain common mortgage concepts in plain English.
Start with the concepts that affect most borrowers.
These are the topics that commonly impact loan approval, deposit requirements, repayments and lender choice.
Borrowing capacity
Borrowing capacity is the amount a lender may be comfortable lending after reviewing your income, expenses, debts, dependants and loan term.
Read guideLoan to Value Ratio
LVR compares the loan amount to the property value. It helps lenders measure risk and can affect rates, LMI and lender choice.
Read guideLMI
Lenders Mortgage Insurance protects the lender, not the borrower. It often applies when borrowing above 80% of the property value.
Read guidePre-approval
A pre-approval gives you an indication of what a lender may support before you buy, subject to property and final checks.
Read guideOffset account
An offset account is linked to your loan and can reduce the interest charged while keeping your funds accessible.
Read guideRedraw
Redraw lets you access extra repayments made into the loan, but it can be less flexible than an offset account.
Read guideUnderstand the structure, not just the rate.
The cheapest-looking rate is not always the best structure. Repayment type, loan purpose and flexibility also matter.
Principal & interest
Principal and interest repayments reduce the loan balance over time while also covering the interest charged.
Read guideInterest only
Interest only repayments reduce monthly repayments for a period, but the loan balance does not reduce unless extra payments are made.
Read guideFixed rate
A fixed rate gives repayment certainty for a set period, but can reduce flexibility and may involve break costs.
Read guideVariable rate
A variable rate can move up or down and often provides more flexibility, including extra repayments and offset features.
Read guideRate lock
A rate lock may secure a fixed rate before settlement. Fees, timing and rules vary between lenders.
Read guideComparison rate
A comparison rate includes the interest rate plus certain fees to help compare loans, but it may not reflect your exact scenario.
Read guideWhat lenders look at behind the scenes.
A strong loan application is about more than income. Lenders review conduct, documents, policy fit and overall risk.
Assessment rate
Lenders often assess your repayments at a higher rate than the actual rate to test whether the loan is affordable.
Read guideLiving expenses
Lenders compare your stated living expenses with benchmarks and may use the higher amount in assessment.
Read guideCredit cards
Lenders usually assess credit card limits, not just balances. Reducing unused limits may improve borrowing capacity.
Read guideCredit score
Your credit score and repayment history help lenders understand how you manage credit.
Read guideGenuine savings
Some lenders want to see savings built up over time, especially for higher LVR loans.
Read guideConditional approval
Conditional approval means the lender is open to approving the loan, subject to outstanding conditions.
Read guideUseful concepts for refinancers and investors.
These guides explain lending strategies that may help with cash flow, investment planning or using equity.
Equity release
Equity release means borrowing against available property equity for a clear purpose, subject to lender policy.
Read guideDebt consolidation
Debt consolidation combines multiple debts into one loan. It may improve cash flow but can cost more over a longer term.
Read guideDebt recycling
Debt recycling is a strategy where some borrowers replace non-deductible home debt with investment debt. Tax advice is essential.
Read guideCross-collateralisation
Cross-collateralisation is when more than one property secures a loan structure. It can reduce flexibility.
Read guideCash out
Cash out means borrowing extra funds above the current loan balance. Lenders usually require a clear purpose.
Read guideRefinancing
Refinancing means moving your loan to a new lender or structure to review rate, repayments, equity or strategy.
Read guideBefore you apply: simple checklist
- Check your income documents are current and easy to explain.
- Review credit card limits, personal loans and car loans.
- Understand your realistic monthly living expenses.
- Avoid taking on new debt before applying.
- Keep savings and deposit funds clearly documented.
- Be ready to explain large account transfers or unusual income.
- Check whether the loan is owner occupied, investment or mixed purpose.
- Speak to a broker before making major changes to your structure.