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A home loan is a loan provided by a bank or lender to help you purchase a property. You borrow money to buy the home and repay it over time with interest. The property acts as security for the loan, meaning the lender can take it if you can’t repay.

Principal and interest repayments mean you’re paying back both the amount you borrowed (the principal) and the interest charged by the lender. Each payment reduces the loan balance and covers the interest, helping you own the property outright over time.

An owner-occupied loan is for a property you plan to live in, often with lower interest rates. An investment loan is for a property you’ll rent out, which may have higher rates and different tax benefits. Lenders assess these differently based on your goals.

An offset account is a savings or transaction account linked to your home loan. The balance in this account reduces the interest you pay on the loan. For example, if you have a $400,000 loan and $20,000 in your offset account, you only pay interest on $380,000.

Lenders Mortgage Insurance, or LMI, is a one-time fee some borrowers pay if their deposit is less than 20% of the property’s value. It protects the lender if you can’t repay the loan. The cost depends on the loan size and deposit.

When you apply for a loan, banks assess your ability to repay by looking at your income, expenses, and debts. They use an assessment rate, which is higher than the actual interest rate, to ensure you can handle potential rate increases. This helps determine how much you can borrow.