Peach Discount Home Loans Glossary

Basic Rate

A rate of interest generally applied to budget loans, which are less expensive than standard variable rate loans. However, such products are not offered with features such as redraw facilities or mortgage offsets.

Break Cost

Capped Rate

This describes the a feature of a honeymoon. This is a rate will not rise above the prevailing standard variable rate, but may fall.

Debt Service Ratio (DSR)

The maximum percentage of an applicants wage (Monthly, Fortnightly or Weekly), which will support loan repayments over the agreed loan term. Generally, lenders set a maximum DSR between 30% to 33%

Establishment Fee

The initial fee paid to a lender to cover basic costs in setting up a loan from initial interview to loan draw down. Not payable with some lenders, also called an Application Fee. 

Exit Fee

Fee imposed by some lenders where the borrower has sought refinance with another lender within the first few years of the a loan.

Fixed Rate

The rate applied to honeymoon, which is fixed at a rate that will not change for the duration of the honeymoon rate period.

Home Equity Loan

A home equity account gives the borrower a revolving line of credit secured by the value of your the underlying asset. This allows the borrower to use the funds for other purposes. (More Detail)

Honeymoon Rate

Describes a rate applied to an Introductory Loan. The rate can be fixed, capped or variable for the first 12 months of the loan. At the end of the honeymoon period the loan reverts to the standard variable rate. (More Detail)

Legal Fee

May be incurred in the case of an outside party being used to prepare bank documentation.

Lenders Mortgage Insurance (LMI)

This payment insures the lender to value of the unpaid principal in the event of default. In such a case the borrowers debt is transferred to the Mortgage Insurer. The figure depends on variables such as the loan amount, the value of the asset and the exact Loan to Value Ratio and is a one-off payment usually made at the time of settlement.  

Loan to Value Ratio (LVR)

This value quantifies the maximum amount a lender will approve against the value of an asset taken as security for a loan.

Lo-doc

Loans available to applicants unable to meet the required income levels to service the loan. These loans typically carry an interest rate premium to reflect the higher risk to the lender.

Non Conforming Loans

Loans available to applicants who do not meet the criteria for regular lending. Typical reasons could range from impaired credit history, insufficient income or venture capital. These loans typically carry an interest rate premium to reflect the higher risk to the lender.

Offset

Offset accounts can help reduce your tax bill by offsetting taxable income from deposit accounts against interest paid in after tax dollars on mortgage repayments. However, not all offset accounts are equal, with many not paying the same interest as you are charged on your mortgage. In this case, the account would be a partial offset. (More Detail)

Portable Loans

A loan feature that allows the borrower to sell a property and move to a new one without having to refinance. Such a feature saves application and legal fees. Typically lenders insist that the loan amount remains the same or less. 

Redraw Facilities

Redraw facilities allow additional repayments on a loan, while retaining access to the additional repayments if required. A number of conditions are typically attached to the a redraw facility, which may include a minimum amount and a fee every time you use it. (More Detail)

Serviceability

Lenders assess each applicant individual on their ability to service the loan. There are significant differences between lenders in this area and it pays to use a home loan broker familiar with serviceability requirements before an application is submitted.

Service Fee

Usually a monthly fee levied to cover bank cost of administering & maintaining the loan account i.e. fixed and variable costs such as staff, IT software / hardware

Standard Variable Rate

The rate which lenders apply to their 'premium' home loan product. Carries features such as a redraw facility, portability, salary and/or offset accounts.

Switching Fee

The lender may impose a switching fee where an existing borrower wishes to change from one loan type to another e.g. Variable Rate Loan to Fixed Rate Loan

UCCL

The Uniform Consumer Credit Code Legislation - a Federal Act of Parliament to ensure uniformity amongst all credit providers. The lender or its agent are required, by this legislation, to set out all fees / charges that the borrower are liable for under the loan contract.

Valuation Fee

Fee which may be charged if the lender seeks to cover the cost of valuing the property taken as security for the loan.

Variable Rate