Jargon Buster
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A
- Advance - This is the entire amount of the money lent to you to pay for the purchase of your house.
- Annual Percentage Rate (APR) - APR can help you compare the cost of different mortgages. It calculates the total interest to be paid over the whole term and includes any charges to be paid as well as the main interest rate.
- Annuity Mortgage (or Repayment Mortgage) - This is a type of mortgage. Every month, over a set number of years, you pay back the money you've borrowed (known as the capital) along with the interest.
- Appreciation - Any increase in the value of your property.
- Arrears - Your mortgage will go into arrears if you do not meet the monthly mortgage payment by the due date. Please keep in mind that your house could be repossessed, if you fail to keep up your repayments.
- Auction - A system of selling a property to a group of interested buyers where the highest bid wins. Prior to the auction, the estate agent will advertise a 'guide' price or 'Advised Minimum Value' (AMV). This is the minimum price at which the estate agent expects the property to sell at. However, at auction there will also be a "reserve price" - this is the minimum price set by the seller at which bids will be considered. To add to the confusion for buyers the 'reserve' price is often higher then the 'AMV'.
If you win the bid, you must immediately sign a purchase contract and pay a non-refundable deposit, usually 10% of the property price. From that moment you are legally bound to buy the home. Therefore, before participating in an auction, you should have mortgage approval from your lender.
B
- Base rate - This is a standard interest rate set across the 'Eurozone' by the European Central Bank. Tracker mortgages are usually linked directly or indirectly to this rate.
- Bridging finance - This is a loan, usually short term, to a person who has bought a new home but has not yet sold their existing home. The loan does not have any repayments but does attract interest. It is paid off when the borrower sells their existing home.
- Buildings Insurance - This is an insurance policy that covers the cost of rebuilding or repairing the structure of a property.
C
- Capital - the sum, also known as the Principal, borrowed to buy a new home
- Chain - This occurs when the seller requires the sale of their own house before being able to complete the purchase of another property. Several parties can thus form a 'chain'. If one party exits, it can cause the 'chain' to collapse.
- Charge - also referred to as 'First Charge' – this is the security that the lender relies on when granting a mortgage. The lender retains a 'charge' on your property meaning that the lender must first be paid from any proceeds in the event of a sale of the property.
- Contents Insurance - This insurance pays for the repair or replacement of your possessions in case of loss, theft or damage. It is advisable, but not compulsory, to have this insurance in place.
- Conveyancing - The legal work involved in buying or selling a house.
- Cost Per Thousand - This is the cost of your mortgage repayments for each thousand euro borrowed. It is generally expressed in monthly terms. It is calculated based on the bank's standard interest rate and the term of the mortgage.
- Closing or Completion - This is the meeting between the solicitors for the buyers and the sellers where the actual purchase of the property takes place. Your solicitor receives the title documents to the property from the seller's solicitor and pays the remaining purchase money.
- Credit Search - this is where the lender undertakes a search through the Irish Credit Bureau (ICB) to check to see if a prospective borrower has a good credit standing from previous loans.
D
- Debt Consolidation - Debt consolidation means taking all your existing loans, such as car loans and personal loans, and pooling them into one larger but easier-to-manage loan, repaid over the term or terms of your choice, usually at a lower mortgage interest rate.
- Default - This is where the terms and conditions of the mortgage are broken. Usually, it is the failure to make payments on the loan. Please keep in mind that your house could be repossessed if you fail to keep up your repayments.
- Deposit - the amount a buyer must pay on exchange of contracts (usually 10% of property sale price).
- Drawdown - After the exchange of contracts, the bank 'draws down' the loan funds and sends them to the buyer's solicitor who receives the funds in order to purchase the property.
E
- Endowment mortgage - a mortgage where the interest monthly to the lender but where the funds to repay the capital are generated by investing in a separate endowment (or savings) policy.
- Equity - This is the difference between the amount you owe on your mortgage and what your home is currently worth. For example, if your home's market value is €400,000 and you owe €250,000 on your mortgage, then there is €150,000 of equity in your home.
- Equity Release - This is when you increase your existing mortgage to release equity.
- Estate Agent - This person represents the seller in return for a fee, usually represented by a percentage of the price achieved for the property - generally 0.9% to 1.5% of the property price.
- European Base Rate - This is a standard interest rate set across the 'Eurozone' by the European Central Bank. Tracker mortgages are usually linked directly or indirectly to this rate.
- Exchange of Contracts - This is the first main stage of the legal process. It is where both parties enter into a legally binding agreement to transfer the ownership of the property at an agreed price.
F
- Facility Letter - more commonly known as Letter of Offer - if your mortgage application is approved you will be sent a loan offer that sets out the conditions of your loan. Your solicitor will also receive a copy of this Letter, with a request to proceed with the legal formalities.
- Financial Regulator - This is a statutory body set up to supervise and regulate financial service companies in Ireland.
- First Time Buyer - A person who has not previously bought or built a house anywhere in the world, including Ireland, and who is purchasing the property as their principal place of residence. Where there is more than one buyer - such as a couple buying together - each of the buyers must be a first time buyer in order to qualify for reduced stamp duty.
- Fixed Interest Rate - This is an interest rate set for an agreed period, e.g. for 3 or 5 years. At the end of this period, the rate converts to a variable interest rate. This type of interest rate means that you know for certain what your repayments will be for the fixed interest period, helping you to plan your finances.
- Freehold - This is a form of legal ownership of property or land.
G
- Guarantor - This is a person other than the borrower who agrees to guarantee the mortgage repayments in the event of the borrower(s) not being unable to.
- Gazumping - The practice where a seller, having already accepted an offer from one buyer, accepts a higher bid from another buyer before the exchange of contracts.
H
- Home Loan - This is another commonly used term for a mortgage.
I
- Indemnity Bond - An insurance premium you may have to pay if the amount you are borrowing is over 75% of the value of the property. Most lenders no longer require this to be paid.
- Interest - A charge levied by the lender for the use of their money.
- Interest Rate - The amount you pay for borrowing a particular sum of money for a specific time, expressed as a percentage rate.
- Interest-Only Mortgage - With an interest-only mortgage your monthly repayments only repay the interest charged on the loan. The original amount of the loan is repaid on or before the end of the mortgage term. This type of loan is often offered for investment properties.
- Interest-Only Period - This is the period of time for which only interest on the loan amount is payable. Your monthly repayments are lower because you are not repaying any of the loan amount borrowed, or capital, for this period. Once the interest-only period expires, your monthly repayments will increase, as you will revert to repaying both a portion of the capital and interest on your mortgage. You should take this increase into account in your financial planning.
J
K
L
- Leasehold - A leasehold title is a right of possession, but does not constitute ownership, of a property under the terms of a Lease, for an agreed period of time, with the payment of rent.
- Letter of Offer - If your mortgage application is approved you will be sent a letter of offer that sets out the conditions of your loan. Your solicitor will also receive a copy of this Letter, with a request to proceed with the legal process.
- Life Assurance - It is compulsory to take out life assurance in conjunction with your mortgage so that in the event of the death of a borrower, the loan is repaid in full to the lender.
- Loan to Value - This is a ratio that expresses your loan as a percentage of the value of your property. For example, if you have a property worth €100,000, and you are borrowing €85,000, your Loan to Value is 92%.
M
- Mortgage - A mortgage is a loan arrangement whereby the bank lends you money so that you can purchase a property. The house is used as security for the loan.
- Mortgage Protection Insurance - By law, you must have a mortgage protection insurance policy that will pay the amount outstanding on your loan in the event of your death.
- Mortgagee - The lender in a mortgage transaction.
- Mortgagor - The borrower in a mortgage transaction.
N
- Negative Equity - When the value of the property falls below the outstanding mortgage debt.
O
- Owner-Occupier - A term used to describe a person who owns and lives in their own property, which is their sole or main residence.
P
- Premium - The amount you pay for an insurance policy, usually paid for monthly.
- Principal - Also known as the Capital – borrowed to buy a new home
- Prime Rate - The interest rate that is applied to most standard loans where a customer does not have any credit history problems.
- Private Treaty - The interest rate that is applied to most standard loans where a customer does not have any credit history problems.
Q
R
- Redemption - When you pay off a mortgage in full.
- Remortgage - This is the process of switching your mortgage from one lender to another, usually for a more competitive rate or to release equity on your home. The new mortgage is used to pay off the loan with the existing lender and at the same time you can also raise new funds for other purposes.
- Repayment Mortgage (or Annuity Mortgage) - This is a type of mortgage. Every month, over a set number of years, you pay back the money you've borrowed (known as the capital) along with the interest.
S
- Searches - A solicitor carries out searches on the property to establish if the seller has a legal right to sell the property and to determine whether there is anything that might affect the title of the property.
- Stamp Duty - This is a government duty, which is charged on a purchase deed and assessed on the market purchase prices of a property. Payment of the duty is noted by placing a stamp on the deed, hence the term "Stamp Duty". There are tiered rates of duty depending on the size and price of the property and on the status of the buyer. First Time Buyers don't have to pay stamp duty if the floor space is equal or less than 125 square metres (1,346 square feet) and you live in the property. If you buy a second-hand home or a new property (over 125 square metres) you may need to pay stamp duty. Residential investors also have to pay stamp duty see the table below for details.
- Structural Survey - This is a survey to confirm the structural soundness of a property. It must be carried out by a qualified surveyor who will produce a report determining whether a property is structurally sound and list any defects. This report is particularly worthwhile if you intend buying an older second-hand property.
- Sub-prime - This is the term used to describe the market that exists for borrowers who have adverse credit histories. A 'sub-prime' rate is a rate that is usually offered to these customers. It can be significantly higher than the standard 'prime' rate.
T
- Tax Relief at Source (TRS) - This means that your mortgage interest rate tax relief is granted at source by your lender thus reducing your monthly repayment. This means that the tax relief on your mortgage interest is factored in to your monthly repayment.
- Term - The length of time for which a mortgage loan is taken out. It can vary from 5 to 40 years.
- Title - The legal ownership of a property. It is also the type of ownership, e.g. freehold or leasehold.
- Title Deeds - The chain of legal documents showing who owns a property. They also contain other information such as planning permissions affecting the property and certificates confirming that all taxes payable on the property, e.g. inheritance tax, have been paid in full.
- Title Insurance - Title Insurance is an alternative to the traditional solicitor's investigation of title. It is an insurance policy that protects the lender against any defects in the title to your property, e.g. boundary disputes, planning issues and lost deeds. With title insurance, the mortgage-switching process can be carried out in as little as 10 days.
- Tracker Rate - This is a variable interest rate that tracks the European Base Rate* with a margin that is fixed for the full term of the loan. For example, the margin may be 1% above the European Base Rate. Any fall in the European Base Rate results in lower repayments, but any increase means higher repayments.
* European Central Bank Main Refinancing Operations Minimum Bid Rate.
U
- Underwriting - The process of assessing a mortgage application to determine the amount of risk involved for the lender; it includes a review of the potential borrower's credit history and a judgment of the property value. It also outlines suitable loan terms and conditions.
V
- Valuation - This is carried out by a qualified valuer who will assess the value of the property you wish to purchase to make sure that it is worth at least its asking price for mortgage purposes. Some lenders will insist that the valuation is performed by a valuer from an approved list provided by them.
- Variable Interest Rate - As the name suggests, a variable interest rate is one that can go up or down during the life of the mortgage.
W
X
Y
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