Understanding home loan terms

Knowing the jargon will help you better understand and compare home loans.

LVR is the amount you need to borrow, calculated as a percentage of the value of your property. For example, if your loan amount is $400K and your property value is $500K, then your LVR is 80%.

The Low Deposit Fee (LDF) is a one-off amount payable by you, in connection with the low deposit being paid by you and/or the low amount of equity you have in your security property. The LDF helps us to recover some of the potential losses that we may encounter if you're unable to repay your home loan. See the Low Deposit Fee Fact Sheet for further information.

Stamp duty is a tax levied by all Australian states and territories on the purchase of property. The amount of stamp duty differs by state or territory and is dependent on the property purchase price, location and property purpose.

Use our stamp duty calculator to work out how much you may need to pay.

The home loan interest rate is the actual rate at which interest is charged on your home loan and doesn’t include fees. An interest rate may be fixed or variable.

The home loan comparison rate is a rate that helps you work out the true cost of a loan and allows you to compare rates amongst other lenders. Shown as a percentage, it includes the interest rate plus some of the fees and charges relating to a loan.

When choosing a home loan, you should consider the comparison rate along with loan features or offers that might meet your needs.

An interest only loan is when the borrower only pays interest, but not the principal (amount borrowed), for an agreed period (up to five years). When the interest only period ends, the borrower starts to pay principal and interest on the loan amount. This means repayments will increase to cover the principal. Borrowers who choose to have an interest only period generally pay more over the life of their loan.

Most home loans are principal and interest loans, which means that regular payments will reduce the principal (amount borrowed) as well as paying off the interest.

Fixed rate home loans have an interest rate that is fixed for a set period of time (typically one to five years). At the end of the fixed rate term, the loan will usually switch to a variable rate.

Variable rate home loans have an interest rate that can move up or down according to market forces, which impacts the amount of interest you pay.

You can choose to have some of your home loan at a fixed rate and some of your home loan at a variable rate.

Macquarie home loans offer the flexibility to have a:

• Home loan with variable rate
• Home loan with fixed rate
• Split home loan with fixed and variable accounts.

The First Home Owner Grant is a one-off payment to help first home owners manage the costs of buying or building a home. The value and eligibility criteria of the grant varies depending on which state or territory the property is located in. In joint applications, both applicants need to be eligible to receive the grant.