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Mortgage Terms Explained

Written by Del Wiggins | 14 January 2026

Buying a home or managing a mortgage can feel confusing, especially with so many unfamiliar terms. For self-employed people, tradies, and small business owners across Australia, understanding mortgage terms is essential to make confident financial decisions.

This guide breaks down common terms in plain language, helping you navigate the process without the jargon.

 

Why Understanding Mortgage Terms Matters

Many borrowers miss opportunities because they do not fully understand the language of home loans. Knowing what terms like principal, LVR, or offset account mean can:

  • Help you choose the right loan for your situation
  • Make it easier to compare lenders and products
  • Reduce stress and surprises later

A home loan glossary ensures you are in control of your borrowing journey and can speak confidently with brokers or lenders.

 

Key Mortgage Terms Explained

Here is a concise guide to some of the most common terms:

  • Principal: The loan amount/balance of your home loan.
  • Interest Only: Repayments based on the interest rate only (no principal reduction)
  • Interest Rate: The cost of borrowing, expressed as a percentage of the loan
  • LVR (Loan-to-Value Ratio): The percentage of the loan amount to the value of the property.
  • Offset Account: A bank account linked to your mortgage that reduces the interest payable
  • Variable Rate: A rate that can change during the life of the loan
  • Fixed Rate: A rate locked in for a set period, usually 1 to 5 years
  • Redraw Facility: Lets you access extra repayments made on your loan

Using a home loan glossary like this helps you understand product features, compare loans, and identify which options suit your cash flow and lifestyle. (Finder – Home Loans Glossary)

 

Common Mortgage Jargon to Watch Out For

While the basics are important, some terms appear less often but can affect your loan:

  • Discharge Fee: The cost to close your loan early or pay it off completely
  • Break Costs: Fees for exiting a fixed-rate loan before the fixed term ends
  • Comparison Rate: Shows the true cost of a loan, including fees and interest
  • Refinancing: Replacing your current mortgage with a new one, often for a better rate or terms

Understanding mortgage jargon ensures you are not caught off guard by fees or loan features.

 

Need Help Navigating Your Mortgage?

Even if you are self-employed or have a unique financial situation, you do not have to navigate mortgage terms alone. Rate Money can help you understand key concepts, clarify your options, and provide guidance for your next steps.

Talk to a Rate Money home loan specialist today to get personalised guidance and make sense of your home loan options.

References
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