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Mortgage terms everyone needs to know.

If you have a home loan or would like to get one there are several words that you need to know and understand.

A recent article by news.com.au suggested when it comes to loan terms 'it pays to educate yourself' because 'if you do your homework and take out the right loan, with the right features at the right price, you could well save yourself tens of thousands of dollars over 25 years'.

The writer of the article Frank Chung spoke to a banking executive to outline a few 'good to know' words and their definitions. We've reworded a few and added a free download with all the explanations attached.

You need to know about:

  • Split loans - A split loan can offer you several combinations of loans ie fixed or variable interest. This can help you take advantage of any interest rate drops and protect your budget against any significant rate rises.

  • Redraw Facility - this is the lower cost version of an offset account which can often cost more. A redraw option allows you to add additional money into the loan but it remains accessible, if you need it.

  • Comparison Rate vs Interest Rate - This is one of the big ones a rate that lets you compare apples with apples; tip - always ask for the comparison rate rather than only looking at the advertised rate.

  • Lenders Mortgage Insurance or LMI - This is insurance that borrowers pay to give the bank (or lender) insurance against a default on the loan. Banks will only charge this fee if you're borrowing more than 80% of the value of the property. Remember that this is the value that the bank decides, not the price you might be paying.

We'd like to add a few more but figured that it would be easier to add them to a free handout. Click here to download 'Mortgage Definitions'