Glossary

This is the minimum price a seller is willing to accept for their property at auction. It’s set before the auction starts and kept confidential. If bidding doesn’t reach the reserve price, the property might not sell, or the seller can negotiate with the highest bidder. 

Helps you estimate how much you can borrow based on your income, expenses, and financial situation—so you can plan your homebuying journey with confidence.   

This is the maximum amount of money a lender is willing to loan a borrower according to their assessment criteria and calculations. The stronger a borrower’s financial position, the higher their borrowing capacity is likely to be. The price range of properties they consider will be dictated by this amount.  

Helps you create a personalised budget based on your income, expenses and savings goals —helping you stay on track and in control of your finances. 

A buyer’s agent works exclusively for property buyers. They take time to understand a buyer’s needs and help them find suitable properties on the market. They evaluate a property’s value and help buyers negotiate sales price and conditions with the seller/real estate agent.  Their commission or fixed fee is paid by the buyer. 

The cash rate is the interest rate set by the Reserve Bank of Australia (RBA) for overnight loans between banks. It influences borrowing costs, savings returns and mortgage interest rates. The RBA adjusts the cash rate to manage inflation, support employment and keep the economy stable. 

This is a document from an insurer confirming a property is currently covered by insurance. It shows details like the policy holder, insured amount and coverage period. Lenders often require this certificate before approving a mortgage to ensure the property is protected against risks like damage or loss. 

The comparison rate is a tool to help borrowers understand the true cost of a loan. It includes the advertised interest rate plus most fees and charges. Displayed as a single percentage, it helps compare loans more easily, showing the real cost beyond just the interest rate.  

This is the legal agreement between a property buyer and seller required to transfer property ownership. It stipulates the terms and conditions of sale, including the agreed-upon selling price and settlement terms.  

A conveyancer, or conveyancing solicitor, handles the legal transfer of real estate from one person to another. They draw up the sales contract between the buyer and seller and follow the process through to the end – when the title is transferred for the agreed purchase price.  

Helps you estimate the maximum property price you can afford and understand your upfront costs, including your deposit, stamp duty and other expenses – so you can plan with confidence.

A borrower’s credit score is a number between zero and 1,200 that is calculated using several factors relating to their credit history. The higher their score, the more creditworthy they are likely to appear as a borrower. The lower your score, the less chance you have of being approved and/or the less favourable your interest rate will be. 

This is the amount of money a borrower pays upfront as a deposit for a home loan. Typically, lenders require a 20% deposit. Borrowers with less than 20% may have their mortgage application declined or have to pay lender’s mortgage insurance to secure the loan. 

Due diligence means thoroughly researching and assessing a property before buying it. This includes checking the title, zoning, building condition and any legal or financial issues. It helps buyers identify risks, understand the property’s true value, and make an informed decision before committing to the purchase.  

An EOI property sale is when buyers submit offers to purchase a property by a set deadline, usually without knowing other offers. It’s often used for unique or high-value properties. The seller reviews all offers and chooses the best one, but they’re not obligated to accept any. 

A fixed-rate loan is a home loan with a locked-in interest rate for a limited period, usually one to five years.  

These are the 8 stages of the home buying process as broken down by Penny to make the home buying journey clearer:    

A loan provided for the purchase of a property. The loan amount, plus interest, is paid back over a long-term period, typically 20 to 30 years. Once the loan is repaid in full, the buyer takes full ownership. 

This is the amount charged by a lender for loaning a borrower money. It does not include the principal loan amount. The interest is proportionate to the principal amount.  For example, if your loan amount is $800,000 and your interest rate is 6.0%, the interest payable over 30-years will be about $926,700. This amount will be added to your principal loan balance.  

Financial institutions that offer loans, including home loans, are referred to as lenders. However, they do not need to be banks. While banks do provide the majority of mortgage finance, non-bank lenders also offer home loans.  

LMI is an insurance policy that borrowers with less than a 20% deposit are generally required to have. It protects the lender against the risk of not recovering the full home loan balance should the property be sold due to such a borrower not meeting their loan repayments.  

The principal loan amount is the money a lender gives a borrower to buy a home. It does not include the interest charged on the loan. For example, if you buy a $1 million home and put down a 20% ($200,000 deposit), your lender will loan you $800,000. Your principal loan amount is $800,000.  

This ratio is the amount a borrower requires, represented as a percentage of the value of the property they’re buying. The bigger their deposit, the lower the LVR will be. The lower the LVR, the lower the lender’s risk. Generally, borrowers with an LVR over 80% are considered by lenders to be a higher risk. 

A mortgage broker is the middleman between borrowers looking for home loans and the financial institutions that offer them. Buyers do not need to apply for a home loan directly with a lender, or lenders, but can, instead, approach a mortgage broker for help navigating this process.  

Pre-approval is a conditional agreement from a lender to loan a borrower a specific amount of money to buy a property. It does not guarantee that they will give them this amount – or even grant the home loan – but it does indicate that they are likely to offer the loan.  

This is the amount a buyer is willing to pay to purchase a property. It is usually based on a buyer’s budget and perceived value of the property. The first offer is usually below both the asking price and the buyer’s maximum budget. A lower offer allows buyers and sellers to negotiate the selling price further.  

An open house is a specified period (day and length of time) where a property for sale is open for viewings. Interested buyers are able to physically view its interior and exterior, inspect the features and finishings and ask the real estate agent questions about the property or sales price.  

This sale campaign is when a property is sold through direct negotiation between the seller and buyer, often with an agent’s help. The property is listed with a set price and buyers make offers. The sale is completed once both parties agree on the terms.  

A legal document that transfers ownership of a property from one person to another. It includes details about the property, the parties involved and any conditions of the transfer. The deed must be signed and registered to make the transfer official. 

A property valuation is a report compiled by a professional and accredited valuer after thoroughly assessing a property and deriving its market value. The value is based on several factors relating to the property.  

A real estate agent helps property owners sell their homes. They work on behalf of sellers, managing all aspects of the property selling process, including negotiating with buyers and securing the sale.  They work in the best interests of sellers and, thus, are paid commission by them.  

Helps you set a target savings amount and figure out how much you need to save each month to reach your goal within your desired timeframe.

Breaks down your savings target into monthly milestones to help you stay on track and reach your goal.

Helps you visualise how long it will take to reach your savings goal and how much you’ll need to save each month to stay on track.

Home loan serviceability refers to a borrower’s ability to make repayments on a home loan. This serviceability is based on the size of the home loan and the affordability of the borrower according to their income and expenses. Each lender will have their serviceability rules and calculations.  

Property settlement is the legal process of transferring a property from a seller to a buyer. This process can take from four to 12 weeks, although the seller and buyer can agree to their own settlement period. On settlement day, the sale is finalised and the buyer takes ownership of the property. 

This is a state government tax based on a property’s purchase price. The cost differs from one state to another. Stamp duty can be a property buyer’s biggest cost outside of their deposit, ranging from tens of thousands to hundreds of thousands of dollars. 

A legal record that proves ownership of a piece of land or property. The document contains details about the property, the owner, and any restrictions, rights or mortgages attached to it. It’s an essential document for buying, selling, or transferring property ownership.