The Mortgage Jargon Buster

Agreement In Principle (AIP)

A document from a lender confirming that, in principle, they will lend you a certain sum as a mortgage. This will help you to identify homes that are realistically within your budget - subject to terms and conditions before a formal loan offer is made.

Annual Percentage Rate (APR)

The APR is the annual rate of interest you will be charged on a loan. It takes account of all the costs involved over the term of the loan, such as any set-up charges, the interest cost, etc.. Allows you to compare different loan offers.

Arrears

Arrears arise where you have fallen behind with the timely payment of your mortgage repayments.

Auction

A common method used to sell property, with a view to generating competition that will increase the sale price. Bids are offered in public and the sale can be agreed on the same day if one of the bids is accepted by the auctioneer.

Base Rate

This is the interest rate set by, say the European Central Bank, to which the banks in Ireland will then add their own margin to arrive at their rate for lenders. “Tracker mortgages” follow this base rate closely.

Some mortgages, such as a fixed rate mortgage, charge a fee if you pay back the loan before the agreed date. The calculation to arrive at the cost should be set out in the original loan offer / contract. This is also known as an Early Redemption Charge (ERC).

Bridging Loan

This is a loan from a lender designed to tide you over, for example, between the time frame of buying a new home and selling your existing home.

Building Energy Rating (BER)

A BER certificate tells you how energy efficient your new home will be. On a scale from A to G, with A being the most energy efficient. A BER certificate is compulsory for homes being sold or rented.

Buildings Insurance

This is a general insurance policy designed to cover the cost of rebuilding your home, say in the event of fire. It does not reflect the site value of your home. Lenders usually require building insurance as a condition for a loan.

Buy-To-Let

A buy-to-let property is bought with the sole intention of letting it to tenants. Most mortgage lenders offer special buy-to-let mortgage deals for this purpose. Terms may not be as attractive as a loan for your Private Dwelling Home.

Capital

Also called principal and refers to the original amount you borrowed from your lender.

Cashback Mortgage

Certain lenders credit your account with a cash sum when you start your mortgage. Designed to help you with legal fees, valuation costs, furnishings, etc.. The overall rate of the mortgage should be considered before deciding to elect for this offer.

Collateral

Collateral is something that a lender accepts as security for a loan. This is usually an asset such as an existing property or investment. If the loan is not repaid, the lender can sell the collateral to meet the outstanding debt.

Contents Insurance

Insurance to cover loss or damage to your household possessions. Often this is added on to the buildings insurance policy – see above.

Conveyancing

This is the term for the legal process of transferring the ownership of property from seller to buyer.

Cost Of Credit

The cost of credit shows you the real cost of borrowing over the term of the mortgage. It is the difference between the repayment of the principle (the amount you borrowed) and the total repayments (to include interest).

Credit History

This is your track record as a borrower with regard to loans taken out in the past. Before considering your suitability for a mortgage, lenders will check if you were late or in default with loans before. The Irish Credit Bureau keeps such records.

Credit Scoring

This is an assessment of how good (or bad) you have been in keeping loans repayments up to date – see credit history above.

Debt Consolidation

This means taking out a single loan to pay off a number of other, smaller loans. If secured on your home the interest rate may be at home loan rates.

Deeds

These are the legal ownership documents of your home or property. Your lender holds them as security, until your mortgage has been paid off.

Default

This is when a payment or series of payments on a mortgage are missed.

Deposit

This is the amount you are required to put down yourself towards the cost of the property. The minimum deposit you will usually need is 10% First Time Buyers, 20% for other borrowers and perhaps 30% if buying an investment / holiday property.

Discounted-Rate Mortgage

A discounted-rate deal is one where the interest rate you are charged is a set amount less than your mortgage lender's standard variable rate (SVR). At the end of the discount period the interest will revert to the prevailing variable rate for that lender.

Early Repayment Charges (ERCs)

See Breakage Cost above.

Equity

Equity is the value of your assets – net of loans. Regarding property, equity refers to the difference between its market value and the mortgage you owe on it.

Equity Release

This process allows you to use the equity built up in your home as collateral or security for a further loan. Equity release is also referred to as ‘re-mortgaging’ and might be used, for example, to borrow to extend your home.

Euribor

The Euribor (Euro Interbank Offered Rate) is the interest rate at which euro area banks will lend to each other. Your own lender then adds on their own margin to arrive at the interest cost to you for borrowing.

European Central Bank (ECB)

The ECB is the central bank for Europe’s single currency, the euro. Its main task is to maintain the purchasing power of the euro and price stability in the euro area. It also sets interest rates for the member countries in the eurozone.

Exit Penalty

Also known as an early encashment or exit charge, this is a charge applied by a lender if you repay a loan before the specified maturity date.

Estate Agent

This is an agent who works on behalf of a seller with the aim of getting them a high price/fast sale or other term in exchange for a percentage of the sale price.

Exchanging Contracts

A stage of proceedings where the buyer and seller are legally bound to complete the transfer of ownership of a property. The buyer signs the contract and sends it (with an agreed deposit) back to the seller, who counter-signs. Solicitors should handle.

First Time Buyer

This generally means someone who has not previously purchased or built a home. First time buyers need a deposit of at least 10% of the market value of a property they wish to buy. They may also qualify for the Help To Buy scheme (see below).

Fixed Rate

This means the interest rate is fixed at a particular rate and for a fixed term. If rates fall, you can pay more than the prevailing rates. If rates rise, you could pay less than prevailing rates. Penalties may apply if you break the terms of the fixed arrangement.

Fixed Rate Penalty

An amount you may have to pay if you wish to pay off your loan, part of your loan or change any of the terms, during the fixed rate period.

Folio

This is the actual register of the title of property and it includes details of the property, the class of title and ownership over the property and any burdens (debts) attaching to it.

Foreclosure

In the event that borrowers fail to repay their loan repayments on time, the lenders can apply to court for a date to be set for it to take possession of a property in settlement of its debt.

Freehold

If you own the freehold of a property, you own the building outright and the land it stands on. An alternative interest in a property might be a leasehold.

Gazumping

This refers to a situation, usually confined to second-hand homes, where the seller provisionally agrees to sell to one person but then favours another person based on their (higher) offer.

Ground Rent

Rent payable on a long lease (leasehold properties) to the owner of a freehold. Often seen with terraced houses in old, settled urban areas. The ground rent can be bought out by payment of a capital sum.

Guarantor

This is a person (often a parent) who may agree to pay off a loan if the borrower fails to pay. Was popular in the past but not so now with the increase in house prices generally.

Help To Buy

A government initiative designed to help First Time Buyers who buy new and unused properties with their initial deposit. Comes in the form of a tax refund of up to €20,000. Subject to terms and conditions.

Homebond

This protects you (mostly for new homes) against loss arising as a result of losing your deposit if the builder goes bankrupt or against major structural faults within the first 10 years, or against water and smoke damage for a period after completion.

Interest-Only Mortgage

An arrangement where only interest is paid on your mortgage each month, without repaying any of the capital loan itself. Intention may be to invest elsewhere and use that sum to pay off the capital at maturity. Professional advice should be sought.

Interest On Loans

This is the amount you pay to borrow money and is added to the loan to come up with the total repayments due.

International Bank Account Number (IBAN)

This is an international standard used for identifying and numbering bank accounts, to make interbank payments more efficient. Used in conjunction with the Bank Identifier Code (BIC) – see above.

Irish Credit Bureau

This is a credit reference agency that maintains information about individual borrowers’ credit histories. See Credit History above.

Joint Mortgage

A mortgage taken out by two or more people. This allows both your incomes to be taken into account for loan purposes. Both have equal responsibility to repay however.

Land Registry

This is a central register of the ownership of land and buildings.

Leasehold

This is where you own the building but not the land it stands on, and only for a certain period (anything up to 999 years).

Letter Of Offer

Also called the “offer of advance”, this is a formal statement by your mortgage lender of the amount they are prepared to lend to you. Normally all correspondence is between the lender and your solicitor.

Loan-To-Income (LTI)

Central Bank rules require that lenders can generally only offer you a loan of up to 3.5 x your (joint) gross earnings. The rules however do envisage that exceptions above this upper limit can be considered in limited circumstances.

Loan-To-Value (LTV)

Generally a loan cannot exceed 90% of the value of your home (for First Time Buyers) and 80% for non-First Time Buyers. Exceptions above these limits can be considered in limited cases. Borrowers must fund the shortfall from their own resources.

Monthly Repayment

The amount you pay your mortgage lender each month. If you're on a repayment mortgage (the most common kind), the payment will include both interest and capital repayments. Interest only loans defer the payment of capital till the end.

Mortgage Contract

A document or group of documents containing all the terms and conditions laid down by your lender regarding your mortgage. Should be dealt with by your solicitor on your behalf.

Mortgage Deed

The legal document that you sign when you obtain a mortgage.

Mortgage Intermediary

Someone who can advise you on loans from a range of different lenders in the marketplace. The more banks that they can consider on your behalf, the better. Some banks use sales staff or tied agents but they can’t advise you on other options.

Mortgage Protection

This is life insurance that clears the balance on your loan if you die before the end of the loan term. It’s compulsory in most cases when buying your home. Tax issues can arise if the home is inherited by someone other than a spouse/civil partner.

Mortgage Term

This is the number of years on your mortgage.

Mortgagee

The lender that lends you the money to purchase your property.

Mortgagor

The person taking the mortgage, the borrower.

Negative Equity

This term is used to describe a situation where the market value of your house is less than the balance you owe on your mortgage.

Pension Mortgage

A loan whereby only interest payments are made for the duration of the term. The intention is that the capital will be paid off from the lump sum portion of your pension at retirement. Professional advice is recommended before proceeding.

Portability

Where an existing mortgage can be transferred between properties when you move house.

Principal

The amount owing to the lender based on the capital loaned to you – it does not include the interest owed separately.

Private Treaty

A method of selling a property. Bids are offered in private over a period of time, usually to an auctioneer, and the seller decides which one to accept.

Redemption

This is where you completely clear (redeem) a mortgage. Can happen where you switch to another lender or where you pay off all balances due and outstanding.

Redemption Penalty

This can occur when you redeem a loan while on a fixed rate. This is penalty is paid on the basis that you are breaking a contract which you entered when you chose a fixed rate. Often referred to as a “break fee” or a “break out fee.”

Rebuild Cost

For insurance purposes, the cost of rebuilding your home if it is destroyed. The underlying site value is not included in this figure.

Remortgage

When you borrow further funds without moving house. Often done for home extensions or perhaps to release equity from your home to fund a business venture, for example.

Searches

Your solicitor will do searches to confirm that the seller of a property can pass ownership to you and that there are no outstanding judgments or debts against the property.

Security

Security is any asset that your lender may require which can be used as collateral and sold if you don’t repay the loan. It may take the form of a mortgage raised against your home, an insurance policy, cash deposit or some other asset.

Second Charge

This is a “second mortgage” or “second lien” which means that a second loan is taken out on property where a first loan and a first charge already exists. The bank with the second charge ranks behind the lender with the first charge in the event of a default.

Service Charge

The fee paid to a property management company/agent for the ongoing maintenance/upkeep of a property and its environs. Most closely associated with apartment living.

Snag List

When buying a new home your architect/surveyor gets an opportunity to survey the property to ensure that there are no defects or unfinished work that needs to be completed. Outstanding matters are listed on the snag list.

Special Conditions

These are non-generic terms on the loan offer that must be satisfied in order to draw down a cheque. Your solicitor will be responsible for attending to these matters with you and on your behalf.

Stamp Duty

This is a tax you pay to the government when you buy a property. The standard rate is 1% on the purchase price up to €1m and 2% beyond.

Standard Variable Rate (SVR)

The default mortgage interest rate that your lender will charge after your initial mortgage deal period ends (if any, say a fixed interest agreement). The rate could be higher or lower than your fixed or discounted rate.

Sub-Prime Mortgage

A sub-prime mortgage is one offered to borrowers unable to obtain finance through normal channels, say due to a credit / debt issue from the past. Sub-prime loans constitute a bigger risk to the lenders so rates and terms will be less favourable.

Structural Survey

This is a full inspection of the property, the surveyor will then generally produce a report which tells you if the property is structurally sound. Although not mandatory it is always suggested (in second hand houses) to have one carried out.

Surveyor

The person who carries out a structural survey – see above.

Term

The number of years over which a mortgage is taken out.

Tied Agent

Someone permitted to sell mortgages only from the one lender to whom they are exclusively tied. Along with branch staff in the banks themselves they are prohibited from offering or arranging alternative options from the marketplace.

Title Deeds

Documentation that shows the ownership of the property. Your solicitor will be familiar.

Tracker Mortgage

This is a mortgage where the interest rate (to include your bank’s margin) tracks the underlying movement in the base rate set by the European Central Bank (ECB). ECB rates have been low for many years resulting in savings for many borrowers.

Top Ups

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.

Undertaking

Undertaking normally refers to the legally binding commitment given by a solicitor to a lending institution to have certain things done.

Valuer

This is the person that you retain to value the property, albeit that it’s the banks who require it before they’ll consider lending. Normally you’d choose an experienced estate agent who’s familiar with local home prices.

Valuation Fee

This is the fee you pay to a professional valuer (see above), such as an auctioneer or estate agent, to estimate a property’s market value.

Valuation Report

An estimate of the value of the property reported to the lender by the valuer. The valuer’s fee is usually paid for by the borrower.

Variable Rate

Variable rates rise and fall in line with general interest rate changes in the euro zone. Variable rates offer the most flexibility (over fixed rates) and allow you to pay off part or all of your loan without having to pay any fees or penalties.

Vendor

This is the person selling the property.