The finance world is full of acronyms, enough to make you go cross-eyed if you’re not careful! If you’re a First Home Buyer trying to decipher the code, let this short glossary of the most commonly used acronyms help;
LVR – Loan to Value Ratio. The total amount of the loan, in comparison to the value of the property it is secured to. For example, if a loan is $400,000 against a property worth $500,000 then the LVR is at 80%.
LMI – Lenders Mortgage Insurance. This is something you will hear about if you are borrowing more than 80% LVR (see above). It’s an insurance policy which covers the lender if you default on your loan, and there is not enough money to cover your outstanding debt by selling the property. Remember that LMI covers the lender, not you! It’s still important to take out LPP (see below).
LPP – Loan Protection Policy. Now this insurance covers you, to help make loan repayments in the event that something happens to you. All policies are different, but may cover things such as death, accident/injury/illness, or involuntary unemployment.
FHB – First Home Buyer. You may be eligible for the FHOG (see below).
FHOG – First Home Owners Grant. Check your eligibility for the First Home Owners Grant, which is issued by the NSW Government. For any ‘outside the box’ scenarios, confirm with your conveyancer.
P&I – Principal and Interest. Refers to loan repayments that pay off the principal (the actual borrowed amount) plus the interest.
I/O – Interest Only. Refers to loan repayments that only pay off the interest that is charged on the borrowed amount.
O/O – Owner Occupied. If you live in the security property, it is considered to be owner occupied. If you’re renting it out, it would obviously be investment.
COS – Contract of Sale. This is the Contract which is exchanged when you buy or sell a house. The real estate agent will typically supply the contract, which has been drawn up by a conveyancer for both parties to sign, agreeing to the terms of sale.
NOA – Notice of Assessment. The letter that you receive from the ATO (see below) after lodging your tax return, which states the taxable income for the financial year, as well as your tax refund or tax debt payable.
ATO – Australian Taxation Office. Yep, those guys.
AIP – Approval in Principal. A fancy term for conditional approval, this is a letter that you will receive outlining what you can potentially be approved for, giving you the option to go shopping around.
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