Glossary

The words on the offer sheet, and what they cost you

38 terms from a Vietnamese home loan contract, and what each one costs you. Ordered by where they appear in the paperwork rather than alphabetically, because that is the order you will meet them in.

The loan itself

Principal: The amount borrowed. Everything else in the contract is a percentage of this, of the outstanding balance, or of the property value.
Outstanding balance: What is still owed today. Under equal principal it falls in a straight line; under equal instalments it falls slowly at first and quickly later.
Term: The full length of the loan, almost always quoted in months rather than years.
Disbursement, drawdown: The moment the money actually moves. Many clocks in the contract start here rather than at signature, including the promotional period and the clawback window. On an off-plan purchase there may be several tranches.
Loan to value (LTV): The loan divided by the bank’s valuation, not by the price you paid. Commonly capped at 70%. The bank’s risk measure, not yours.
Valuation: The bank’s own assessment of what the property is worth. If it comes in below the agreed price, the loan shrinks and your deposit requirement grows.
Security, collateral: The property the bank can take and sell if the loan is not repaid. Registering the security is one of the fees payable at drawdown.

Rates

Promotional rate, preferential rate: The advertised rate, fixed for an opening period of six to thirty-six months. It is a discount with conditions attached, not the price of the loan.
Floating rate: What applies after the promotion: the base rate plus the margin, reset at intervals. It covers most of the term and therefore most of the cost.
Base rate, reference rate: The part of the floating rate the bank sets. Defined differently by each bank, often as a published deposit rate of a stated tenor. See base rate plus margin.
Margin, spread: The fixed number of percentage points added to the base rate, typically about 3 to 5 in reports from 2025 and 2026. The only part of the long-run rate the bank commits to, and the part worth negotiating.
Reset date: When the floating rate is recalculated, commonly every three or six months. Check how much notice you receive before the new instalment applies.
Rate cap: A contractual limit on how far the rate can rise, either at a single reset or over the term. Present on a minority of products and never volunteered. If the contract is silent, there is none.
Effective interest rate: The single fixed rate that would reproduce your actual payments, with no fees. The only figure that makes two differently structured offers comparable. See one number.
Nominal rate: A rate quoted without compounding, for example 1% a month described as 12% a year. The compounded equivalent is 12.6825%.

How the repayment is structured

Interest on the reducing balance: Interest is charged on what is still owed, so it falls as the loan is repaid. The normal structure for home loans.
Flat interest: Interest is charged on the original amount for the whole term. A flat rate is worth roughly 1.8 times itself as a reducing-balance rate on a one to three year loan, and about 1.5 times on a twenty year one. Common on car and consumer finance.
Equal principal: The same capital repayment every month; the instalment starts high and falls. Cheapest over the term.
Equal instalments, annuity: One fixed payment covering interest and capital, recomputed whenever the rate changes. Lower and more predictable payments, higher total cost.
Amortisation schedule: The month-by-month table of interest, capital and balance. Ask for it as a file for the whole term; it resolves every ambiguity about the method.
Principal grace period: An opening stretch of interest-only payments. Useful for bridging a dated gap, and it makes the payment afterwards markedly larger because the capital is compressed into fewer months. See the cliff at the end of it.
Instalment: The scheduled monthly payment: capital plus interest, excluding any overpayment.
Overpayment: Capital paid above the scheduled instalment. Check whether your contract treats it as early repayment and charges the tier on it.

Fees and exit

Early repayment fee, prepayment penalty: A percentage of the amount repaid early, tiered by contract year and typically falling from 3% to nil by year six. See the early repayment fee.
Promotional interest clawback: Repayment of the interest discounted during the promotion, triggered by settling inside a stated window. Frequently larger than the penalty. See the clause that takes it back.
Clawback window: How many months from disbursement the clawback applies for, commonly 24 to 60. Usually longer than the promotion itself. The date it closes is the most important date in a refinancing decision.
Arrangement or appraisal fee: Charged at drawdown, from nil to around 0.5% of the facility.
Notarisation fee: A scale fee for notarising the mortgage contract, payable at drawdown.
Security registration fee: Registering the bank’s interest in the property. Modest but real.
Credit life insurance: Cover that repays the outstanding balance if the borrower dies or is permanently disabled. Usually sold as a single premium of around 5 to 6% of the loan, which is worth about 1 to 1.25 points of effective rate on a twenty year loan. See insurance sold with the mortgage.
Property insurance: Fire and similar cover on the security. Normally a genuine condition of the loan, and normally inexpensive.
Late payment interest: A penalty rate on overdue amounts, commonly 150% of the contract rate on the overdue principal.
Settlement quotation, redemption statement: The bank’s figure for closing the loan on a given date, including penalty and clawback. Ask for it in writing before committing to a refinance.

Affordability

Debt to income (DTI): The required payment as a share of gross income. Banks commonly allow 50 to 60%, often measured on the promotional payment. A more durable ceiling is 40% measured on the floating payment.
Stress test: Rerunning the loan with the floating rate raised, conventionally by two percentage points, to see whether the payment is still affordable.
Surplus: Income less living costs less the required payment. The only affordability measure that is about your household rather than the bank’s risk.
Emergency fund: Cash held after the deposit and every drawdown fee has been paid. Six months of the peak instalment is a reasonable floor.
Payment shock: The jump in the instalment when the promotion ends, a grace period ends, or the rate resets upwards. On a typical loan the first of these is around 37%.

Still unclear

If a term on your own contract is not here, send it through the contact page and it will be added. The guides work through the ones that cost the most money, and the loan inspector prices them against your own figures.