Mortgage Jargon Buster

Mortgage Jargon Buster 2018-03-23T15:04:14+00:00

An annual percentage rate (APR) is the annual rate charged for borrowing or earned through an investment, and is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan.

Also known as a repayment mortgage. This is the most common type of mortgage. Your lender works out the amount you need to repay each month to clear your mortgage by the end of any agreed term.
If you fall behind in your mortgage repayments it means your mortgage is in arrears.
This is a mortgage to purchase a property for investment purposes, usually where you want to let or rent it to a tenant.
This is the original amount of money you borrow.
This is a legal contract. When you wish to buy a house, you first sign a Contract for Sale with the seller. It must be in writing and signed by both the buyer and seller to become legally enforceable. Normally a deposit is paid when signing the Contract for Sale.

This is the transfer of legal title of real property from one person to another. A typical conveyancing transaction has two major phases: the exchange of contracts and completion (also called settlement, when legal title passes and equitable rights merge with the legal title).

The cost of credit shows you the real cost of borrowing. It is the difference between the amount you borrow and the total you will need to repay, including the interest, by the end of the loan period.

The document used to transfer ownership of a property must be in the form of a deed – it is signed by both the seller and the purchaser as evidence of transferring ownership.

A sum of money paid by the purchaser when an offer to purchase is made. Two deposits may be payable – the first is a refundable booking deposit. You normally have 21 days after paying this deposit, generally referred to as the ‘cooling off’ period, before signing the Contract for Sale. On signing the Contract, a deposit is paid to secure the property purchase. In general this second deposit is non-refundable.

Once all of the conditions of the mortgage have been fulfilled to the satisfaction of the Bank and the contracts have been exchanged, the Bank will ‘draw down’ the loan funds and send them to your solicitor so that the property purchase can be completed.

This is the difference between the value of your property and what you owe under your mortgage loan.

A first-time buyer is a person who has never purchased a property in Ireland or abroad.

The mortgage interest rate stays the same for a set period of time, usually two to five years. This means you can be sure of exactly what you will be paying on your mortgage each month.

A third party who agrees to meet the monthly mortgage repayment if you are unable to. This type of structure can occur with first-time buyers, with the guarantor likely to be a parent or guardian.

This is where the seller accepts a verbal offer with one person but then accepts a higher offer from another person.

This is the cost to you of borrowing money. The rate is usually expressed as a percentage rate per annum (i.e. per year). Interest rates can be either fixed or variable.

Once your application is approved, a Letter of Offer detailing your mortgage offer from the Bank is issued to you and to your solicitor. It will include the interest rate, how you are to repay your loan and the duration (see ‘Term’ below) of the mortgage loan. Full Terms and Conditions are included. It must be signed and returned to the Bank within 30 days of the date of the Offer Letter to remain valid.

LTV is the amount that you are borrowing compared to the value of the property you are buying. For example, if you buy a property valued at €400,000 and borrow €320,000, your LTV is 80%.

A legal agreement by which a bank, building society, etc. lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.

This is where the market value of your property is less than what you owe under your mortgage loan.

This is the most common means of selling property in Ireland. It occurs when a person puts a property up for sale and then is open to ‘offers’ upon accepting an offer the property will normally be described as ‘sale agreed’ and not open to further offers and contracts are sent to the buyers solicitor with a view to exchanging within a certain period of time.

When a mortgage loan is fully repaid the mortgage is said to be redeemed.

When you change your mortgage without moving. You can do this to save money, to change to a different type of mortgage or to release equity from your home.

The amount you agree to pay each month on your mortgage.

A proportion of the mortgage is set at a fixed rate, and the remainder at a variable rate. If interest rates decrease, repayments on the variable portion of the mortgage decrease as well. If interest rates increase, only the variable payment is affected.

This is a tax on the purchase of a property. In general, the only factor affecting the amount of stamp duty is the value of the property. For residential property valued up to €1,000,000 the amount of stamp duty payable is 1%. The rate payable on the balance is 2%.

The term of the mortgage loan is the length of time over which you agree to pay off the loan. The longer the term the less you pay each month, but a longer term also means paying more interest over the duration of the loan.

The right to ownership of property, especially land. Types of title include freehold (where the owner owns land outright) and leasehold (where the owner has a lease of the land). For technical legal reasons some apartment owners own their property under leases that last hundreds of years.

An additional loan given by the lender to an existing borrower on the same mortgage security. The loan ‘tops up’ an existing mortgage to a higher level.

A professional employed by lenders or insurers to assess the level of risk in providing lending / insurance cover.

A report which describes a property and estimates its market value. It is prepared by a professional valuer.

A variable-rate mortgage, adjustable-rate mortgage (ARM), or tracker mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets. The loan may be offered at the lender’s standard variable rate/base rate.