Regardless of whether this is your first, second or final finance application it’s highly likely that some of the “lingo” that gets used by lenders has left you feeling a bit bamboozled. Don’t worry – you’re not alone!
Whilst some may choose to use jargon to hide the finer detail from their clients – The team at FBT believe in educating our clients in order to assist you in making better choices…Maybe that’s why smart people come to us for their loans!
Here are some of the most common terms you will encounter: From Application to Settlement!
LVR – Loan to Value Ratio. Basically, how much the loan amount will be compared to the property/security value. For example, if a property is valued at $500,000, and the loan is $400,000: then the loan is at 80% LVR.
Principal – This could mean either the amount left owing on the loan, or the total amount initially funded when the loan was settled.
P&I – Principal and Interest. This refers to the type of repayment and means that you are repaying both the principal loan amount and the interest charged on the loan.
IO – Interest Only. This refers to the type of repayment and means that you are repaying only the interest charged on the loan.
LMI – Loan Mortgage Insurance. Loans above a certain “LVR” (typically 80%) will require “LMI”, LMI is a type of insurance that the applicant pays for but is for the banks benefit.
LPI – Loan Protection Insurance. Provides personal protection insurance to cover the amount of the loan and is for your benefit.
Completion Costs – This is the total sum of the additional costs that will be paid at settlement. Costs could include items such as; Conveyancing Fees, Title Searches, Insurances, Rate/Water Split amongst other potential expenses.
Stamp Duty – This is a tax that is paid to the State Revenue Office at the settlement of a property transaction by the purchaser.
Term – This refers to the length of the loan. Terms are typically expressed in months, 360-month term would be 30 years.
Split – Some loans can be “split” and have both a fixed interest and a variable interest component.
Introductory/Honeymoon/Discounted Rate – This is a term often used when a loan might start out at a certain interest rate for a certain period of time and then in the future change to another.
Revert Rate/Standard Rate – This is the interest rate that may apply if you are on a “Fixed” interest rate or an “Introductory” Rate… the Standard Rate varies from Bank to Bank but its often much higher then you may realise.
YB/Your Broker – That’s us! The expert team at Finance Brokers of Tasmania located in Burnie, Launceston and Hobart are here to assist you in any way that we can.
As always we are here to serve you. If you have any questions, or if we haven’t covered a term above that has (or is still!) confusing you we would encourage you to get in touch.