Thinking About Your First Home? Key Mortgage Terms Every First Home Buyer Should Know
If you’re thinking about buying your first home, you’ve probably noticed the mortgage world has its own language. LVR, offset, redraw, pre-approval — it can feel like everyone else knows what these words mean and you’re expected to keep up.
The good news is you don’t need to know everything. You just need to understand the key terms that affect your repayments, flexibility, and what you’ll actually pay over time. Below is a plain-English guide to the most important mortgage terms first-home buyers should know.
1) Mortgage
A mortgage is the loan used to purchase your home. The property itself is used as security, which is why lenders carefully assess your income, expenses, and deposit before approving the loan.
2) Deposit
Your deposit is the amount you contribute upfront. Many buyers aim for 20% to avoid extra costs like Lenders Mortgage Insurance, but there are ways to buy with less depending on your circumstances.
3) Loan-to-Value Ratio (LVR)
LVR is the percentage of the property value you’re borrowing. For example, borrowing $450,000 on a $500,000 property means a 90% LVR. Higher LVRs generally mean higher risk for the lender.
4) Lenders Mortgage Insurance (LMI)
LMI is usually required when your deposit is less than 20%. It’s a one-off cost that protects the lender, not you, and can sometimes be added to your loan.
5) Pre-Approval (Conditional Approval)
Pre-approval is an indication from a lender of how much they may be willing to lend you. It helps you understand your budget before you start house hunting, but it isn’t a final guarantee.
6) Principal and Interest vs Interest Only
Principal and interest repayments reduce both the loan amount and interest over time. Interest-only repayments only cover the interest for a set period, meaning the loan balance doesn’t reduce during that time.
7) Fixed Rate vs Variable Rate
A fixed rate gives you repayment certainty for a set period, while a variable rate can move with the market and may offer more flexibility. Some loans combine both.
8) Loan Term
The loan term is how long you have to repay your mortgage, commonly 25–30 years. Longer terms reduce repayments but increase total interest paid over time.
9) Offset Account
An offset account is linked to your loan and reduces the balance used to calculate interest. For example, a $400,000 loan with $20,000 in offset means you only pay interest on $380,000.
10) Redraw Facility
Redraw allows you to access extra repayments you’ve made. While it can be useful, it’s important to understand any limits or processing times involved.
11) Fees and Charges
Home loans may include application fees, ongoing package fees, valuation costs, and exit fees. Understanding these upfront helps you compare loans properly.
12) Stamp Duty and First Home Buyer Concessions
Stamp duty is a government tax on property purchases and varies by state. Many first-home buyers may be eligible for concessions or exemptions depending on where they buy.
Feeling Overwhelmed? You Don’t Have to Do This Alone
If all these terms feel like a lot to take in, you’re not alone. Most first-home buyers feel exactly the same — and that’s where having the right support makes all the difference.
Chase Douglas has extensive experience in mortgage lending and works closely with first-home buyers to explain these terms in plain English, compare loan options, and guide you through every step of the journey.
Whether you’re just starting to think about buying, saving for a deposit, or ready to apply for your first loan, speaking with Chase can help you move forward with clarity and confidence.
If you’re thinking about your first home, now is the perfect time to talk to Chase and make sure your first mortgage is set up right from the start.
