Glossary I-L


What you earn, including your salary or wages, overtime payments, interest and dividends, rental income etc. Lenders will need to know your income when you apply for a loan.

A regular repayment that the borrower makes to pay off a home loan. These repayments will typically be made at monthly, fortnightly or weekly intervals.

Interest in Advance Payments
Payments made to cover upcoming interest charges, usually on an investment home loan with interest only repayments.

Interest Adjustment
When additional repayments are made on a fixed loan, an interest adjustment cost is sometimes charged to compensate the lender for loss of interest revenue.

Interest Only Payments
Payments made on a loan which only covers interest charges i.e. no payments are made to reduce the principal loan amount. This is generally only used for investment loans, and the period of interest only payments is usually set from 1 to 5 years.

Interest Rate
This is the rate (as a percentage) at which you will be charged interest on your home loan. Interest rates vary between lenders and between various types of loans. Interest rates change reasonably frequently (due to competition between the lenders and the policies of the Reserve Bank of Australia), which in turn changes your repayment amount. Most lenders offer loan products allowing you to set a fixed interest rate if you desire.

Introductory Rate
A reduced interest rate offered usually for the first year of the loan, after which the loan will revert to a standard rate. Also known as a discount rate.

Investment Loan
A loan taken out for the purpose of buying an investment property. Investment loans often have features which you would not normally use on an owner occupied home loan, such as making interest only payments or paying interest in advance.

Investment Property
Any property purchased for the sole purpose of earning a return on the investment, either in the form of rent or capital gain.

Joint Tenants
A form of property ownership where the interest is equal between all parties. The right of survivorship is a feature of joint tenancy, meaning that an interest passes automatically to the surviving party upon death.

Lenders Mortgage Insurance (LMI)
This is insurance that protects the lender if the borrower defaults on the loan. It is required for loans the lender may consider risky. For example when the amount to be borrowed is over 80% of the property value. This form of insurance provides no protection to the borrower.

Your liabilities are your debts, or what you owe. When applying for a loan, lenders will want to know about your liabilities such as existing home loans, personal loans, hire purchases, credit card limits etc.

Line of Credit Loan
A line of credit loan allows you to borrow funds (usually up to 80% of the value of your house) and use those funds for any personal use. Repayments are usually very flexible, meaning you can make repayments whenever you like and for any amount, providing you stay within your credit limit. The loan is usually ongoing, with no fixed term.

Loan Administration Fee
A monthly fee charged by the lender for maintaining and administering your loan. Most lenders have a variety of loan products, some with monthly fees and some without. Also known as a loan maintenance fee or an ongoing monthly fee.

Loan Approval Fee
Fee charged by the lender to process your loan application. Some lenders may waive or reduce this fee for certain products. Can also be known as an application fee or establishment fee.

Loan Comparison System
A software program to help work out and compare the true cost of different loans on offer by various lenders.

Loan Maintenance Fee
A monthly fee charged by the lender for maintaining and administering your loan. Most lenders have a variety of loan products, some with monthly fees and some without. Also known as a loan administration fee or an ongoing monthly fee.

Low Doc Loan
Low Doc Loans are offered by some lenders to people who lack the normal income statements or tax records to prove their income. Low doc loans may be of use if you are self employed. The lender will still require proof that the loan can be serviced.

Loan to value ratio. This is one of the figures used by lenders when appraising a loan application. It is calculated by expressing the loan amount as a percentage of the property value. For example, for a loan application of $240000 on a property worth $300000, the LVR would be 80%. As a guide, most lenders will lend amounts up to 80% LVR, or higher with mortgage insurance – these figures will vary between lenders and between loan products.