Property edition: Australian homeowners confused by mortgage terminology

AUGUST 2026

More than half of Australian homeowners do not fully understand key home loan concepts, with many turning to social media and artificial intelligence for financial guidance instead of professional advice.

A survey from Money.com.au found that 58 per cent of homeowners admit they do not fully understand crucial mortgage terms. The national survey included more than 1,000 Australians.

The loan-to-value ratio (LVR) was identified as the most misunderstood concept, with 26 per cent of respondents saying they do not understand it. This figure affects borrowing eligibility, interest rates and whether a borrower must pay Lender's Mortgage Insurance (LMI).

Redraw facilities and offset accounts followed closely behind, with 17 per cent unsure how either works. LMI itself confused 16 per cent of those surveyed, whilst comparison rates were unclear to 14 per cent. One in ten homeowners said they do not fully understand home equity.

The confusion was not limited to younger borrowers. Gen Z and Millennials each recorded a 61 per cent rate of confusion around key loan concepts, whilst Gen X came in at 58 per cent and Baby Boomers at 59 per cent.

The findings come as more Australians are actively reviewing their home loans. According to data cited by the Australian Banking Association, more than 640,000 homeowners refinanced their mortgages in 2025, a record level and a 20 per cent increase from the previous year.

Money.com.au mortgage expert Nick Burgess attributed part of the problem to borrowers turning to unverified online sources for financial guidance. "If you don't have a firm grasp on basic mortgage terms and features, you're likely not maximising your loan's potential and could end up paying more interest over the loan's life or dragging out your mortgage for longer than you need to," Mr Burgess said.

He said too many borrowers were relying on generic online information and social media opinions to understand how mortgages work. One in five Australians say they trust AI tools like ChatGPT for home loan information. "Too many borrowers are graduating from what I'd call the Facebook and AI University," Mr Burgess said.

Mr Burgess described real-world consequences of the knowledge gap, including a first-home buyer in Sydney who attempted to refinance without realising their LVR remained above 80 per cent, which would have triggered another LMI payment. Another couple kept $200,000 in a standard savings account rather than an offset account because no one had explained how offset accounts reduce interest charges.

"Your mortgage is likely the biggest debt you'll ever take on, so it pays to understand key concepts like LVR, how the comparison rate differs from the advertised rate, and the difference between an offset account and a redraw facility," he said.

A quick guide

Term	Definition
LMI (Lenders Mortgage Insurance)	Insurance that protects the lender if a borrower defaults on their home loan. It's usually required when borrowing more than 80% of a property's value and is typically paid by the borrower.
LVR (Loan-to-Value Ratio)	The percentage of the property's value that is being borrowed. For example, borrowing $800,000 to buy a $1,000,000 property results in an 80% LVR.
Redraw Facility	A feature that allows you to withdraw any additional repayments you've made on your home loan, subject to your lender's terms and conditions.
Offset Account	A transaction or savings account linked to your home loan. The balance in the account offsets your loan balance when interest is calculated, helping reduce the amount of interest you pay.
Comparison Rate	A rate that combines the loan's interest rate with most fees and charges to give a more accurate indication of the overall cost of the loan. It can help compare similar loan products.
Home Equity	The difference between your property's current market value and the amount you still owe on your home loan. As you repay your loan or your property's value increases, your equity generally grows.

At McQueen Group, our Head of Lending & Finance Broker, Shuro Shome, takes the time to explain these terms to our clients as he works with them to secure their ideal loan. This allows our clients to have clarity, confidence and peace of mind.

If you have any questions or would like further information on the above, please don't hesitate to reach out and book a call with our lending team.

This article is general in nature and does not constitute legal, tax, or financial advice. Please consult your professional adviser for guidance specific to your circumstances.

 Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS) or other offer document prior to making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).