Glossary
Ziggy Rate - a mathematical formula that takes into account all costs involved in a home loan over the Comparison Rate Period (a period of time selected by a borrower) in order to compare the cost of one home loan to another in today’s value.
LVR (Loan to Value Ratio) - a ratio used by a lender to help them determine the risk associated with a home loan, it is calculated by dividing the total loan amount by the value of the property being used as security.
Loan to Value Ratio (LVR) - see LVR
Lender Rating - Lender ratings are determined by 4 factors, their bidding accuracy, approvals on time, settling on time and borrower feedback. This gives an idea of what type of service the lender provides, click here for a more detailed explination.
Redraw Facility - a feature of a home loan where a borrower can withdraw excess repayments made to the home loan
Offset Facility - a feature of a home loan where a borrower can use the credit balance held in a savings account to reduce the amount of interest payable on a home loan instead of earning interest on the savings account
Fixed Interest Rate - a rate that a lender or a borrower cannot change during the period of the fixed rate. At the end of the fixed rate period the interest rate usually changes back to a variable rate
Variable Interest Rate - a rate than can move up or down at the discretion of the lender or in line with market conditions, also known as a floating rate
Servicing Ratio - a ratio used by a lender to help them determine if a borrower can afford to make the repayments on a home loan, it is calculated by taking into account the amount of surplus funds available after meeting all living and financial commitments.
Early Repayment Fees - a fee charged by a lender in the event that a loan is repaid sooner than expected, it is designed to protect a lender from losing money on a loan where they have not passed on the costs of establishing a loan to the borrower
Mortgage Insurance (LMI) - an insurance policy taken out by a lender to protect them from the risk of losing money in the event that a borrower defaults on the home loan. The policy does not protect the borrower only the lender but is usually paid by the borrower so that they can have their loan approved. This insurance is usually charged where the Loan to Value Ratio (LVR) exceeds 80%
Lenders Mortgage Insurance (LMI) - see Mortgage Insurance
Comparison Rate Period - a period of time selected by a borrower from one to seven years (1 -7 years). All loan bids are then compared to each other using this period of time as the benchmark.
Lender / Bidder - because Ziggybid allows mortgage brokers and lenders to bid for loans, Ziggybid often uses the term lender to decribe a bidder for a loan which may be a mortgage broker or an employee of a lender.
Break Fee (Fixed Rate Break Fee) - this is a fee charged by a lender to let you repay a fixed rate loan before its expiry date. The fee is difficult to calculate because it involves a number of variables such as the rate that you borrowed at, the remaining number of months left to run before the rate expires and the interest rate the lender could re-lend the funds at today. In general the longer the time to expiry and the more interest rates drop the higher the break fee will be.