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Mortgage Jargon: Security and Approval

December 20, 2019 / 5 min



Mortgage Jargon: Security and Approval

December 20, 2019 / 5 min


Taking out a home loan is something that can fill you with feelings of both excitement and trepidation. While you’re excited about the prospect of owning your own home, and getting your foot on the property ladder, you’re also confused by a lot of the terms casually thrown around by your mortgage agent.

Don’t worry, it’s normal to feel this way. As we talked about in our previous edition of the XYZed, many Australian mortgage owners don’t understand even some of the most basic terms associated with home loans. In the latest in our series where we breakdown mortgage terms, we look at security and approval, and what they mean for you when it comes to taking out a home loan.


Security is something of value, typically a property, or a sum of money that is used to protect (or secure) your loan. The value of your security, whatever it may be, should be greater than the value of your loan. This means that if you’re unable to repay your loan, the security can be sold, which should cover the cost of the loan and the costs associated with selling the security.

Property Security

When you’re looking to take out a home loan to buy a property the property itself is usually the security used to secure your loan. If you’re unable to repay your loan, your lender may have to try to sell your property to recoup the value of the loan.

Conditional approval

When you apply for a home loan the lender will assess your application to see if you satisfy their lending criteria. The assessment process usually involves numerous checks, including of your income, outgoings and deposit, as well as your personal identification. If everything checks out, you will receive conditional approval for your home loan, which means your loan has been approved in principle. Conditional approval means you can go ahead and make an offer on a property.

Formal approval

The next step after conditional approval is formal approval, otherwise known as unconditional approval. When you have received conditional approval and made an offer on a property, the lender carries out more checks, including a valuation of the property. So long as everything checks out, you should receive formal approval, which gives you the green light to buy a property.


The final step to becoming a property owner is settlement. It is a complicated process that involves numerous parties, including lenders, solicitors and real estate agents. The process can drag on for several months but once it’s complete, and the property seller has been paid, then the property will be registered in your name – you’re now a bona fide home owner!

If you’re self-employed and looking for a home loan, RedZed can help. Call us on 1300 722 462 or visit our website.


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