Lending has its own vocabulary, and most of it is never explained to borrowers. The terms below are the ones that actually change what you pay or what you qualify for.
Where a term has a fuller explanation elsewhere on the site, it is linked.
| Term | What it means |
|---|---|
| Loan-to-value ratio (LVR) | The loan as a percentage of the property value. Above eighty per cent usually triggers mortgage insurance |
| Serviceability | Whether your income supports the repayments after a lender’s adjustments |
| Assessment or buffer rate | The higher rate a lender tests you against, rather than the rate you pay |
| Genuine savings | Deposit funds you accumulated and held yourself, usually for three months or more |
| Shading | Counting only a proportion of variable income such as overtime, bonus or rent |
| Add-back | An expense restored to a self employed borrower’s income because it is not an ongoing cash cost |
| Credit enquiry | A record on your credit file each time you apply. Several in a short period concern assessors |
| Term | What it means |
|---|---|
| Comparison rate | The interest rate adjusted to include most fees, so two loans can be compared |
| Lenders mortgage insurance (LMI) | Insurance protecting the lender, paid by you, when the LVR exceeds eighty per cent |
| Offset account | A transaction account whose balance reduces the interest charged on your loan |
| Redraw | Access to extra repayments you have already made, which is not the same as an offset |
| Break cost | The amount payable for exiting a fixed rate early, based on wholesale rate movement |
| Discharge fee | Charged by your outgoing lender when a loan is paid out |
| Interest only | Repayments covering interest alone for a set period, after which the repayment rises |
| Capitalised | A cost added to the loan balance rather than paid upfront, so you pay interest on it |
Two of these are routinely confused. The difference between an offset and redraw is set out in offset compared with redraw, and it matters for tax as well as access.
The interest rate is what is charged on the balance. The comparison rate adjusts that figure to include most fees and charges, so two loans can be compared on a more equal footing. A low rate attached to high fees shows a noticeably higher comparison rate, which is exactly what the measure exists to reveal.
No, and the difference matters. An offset is a separate transaction account whose balance reduces the interest charged, and the money remains yours. Redraw is access to extra repayments already made against the loan, and withdrawing from redraw for a different purpose can affect the deductibility of interest on an investment loan.
It is the loan amount expressed as a percentage of the property value. A $640,000 loan on an $800,000 property is an eighty per cent LVR. The figure matters because above eighty per cent most lenders require mortgage insurance, and the premium rises steeply as the ratio increases toward ninety-five per cent.
Because it determines how much you can borrow. Lenders test whether you could still afford repayments if rates rose, by adding a margin to the current rate and assessing against that higher figure. Your actual repayment is based on the real rate, but your borrowing limit is set by the assessed one.
Most lending terms describe something simple. The confusion usually comes from nobody defining them at the point they are first used.
Read more about residential lending, or read fixed compared with variable and what LMI is.
Ask us anything that is still unclear.
Paritosh Wadhwani | Director and Principal Broker, APW Finance
Member of the Finance Brokers Association of Australia (FBAA). Arranging residential, commercial and specialist lending for Sydney clients across a panel of more than 50 lenders.
APW Finance Pty Ltd, 304/20a Lexington Drive, Bella Vista NSW 2153. Email: info@apwfinance.com. Phone: +61 447 959 546.
ACN 620 646 479 | ABN 79 620 646 479
This guide is general information only. It does not take into account your objectives, financial situation or needs, and it is not financial or credit advice. Lending criteria, interest rates, duty thresholds and government schemes change, and every application is subject to lender approval. Consider whether this information suits your circumstances and seek independent advice before acting. Figures quoted are current at the date below and should be confirmed before you rely on them. Last reviewed: October 2026.
APW Finance Pty Ltd delivers expert lending solutions with personalised service, empowering clients across residential, commercial, and business sectors.