Glossary of Terms

- A -

Acceptance Fee
Some mortgage lenders charge an acceptance fee when they give you a mortgage. This is usually only a very small percentage of the value of the loan (eg 0.5%). Luckily, most lenders have now waived this fee.

Amortisation
Paying off a debt in regular instalments over a period of time. In this case, it is the number of years it takes to repay a mortgage in full. The most common amortisation period is 25 years.

APR (Annual Percentage Rate)
The Consumer Credit Act defines APR as the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. It is considered to be the best means of comparing the cost of different types of credit as it presents the true cost of credit to consumers, taking into account how and when interest payments are charged. Generally, the lower the APR, the lower the cost of a particular credit deal to the consumer. APR must be displayed by law where any credit is offered to a consumer. This is to help consumers make an informed decision when comparing different credit options as it allows them to compare like with like.

- B -

Broker
An intermediary that charges a fee or commission for giving advice and offering a range of mortgages.

Building Insurance
Insurance to cover the structure, fixtures and fittings of a property.

- C -

Capital
The amount of money borrowed to buy a home.

Capped Rate Mortgage
With a capped mortgage repayments can vary, but only up to an agreed limit. Once it reaches this limit, if mortgage rates go higher, repayments will stay the same, and if rates go down, so will the repayments.

Chain
When a seller needs the sale of their current house to complete the purchase of another. The same situation may occur for other people within the chain. As a result, if one sale falls through the whole chain can collapse.

Collateral
Property or some other asset used as security for a loan.

Contents Insurance
Insurance to cover any loss or damage to possessions within a property.

Contract
A written legal agreement between the seller and buyer binding both parties to the sale of the property.

- D -

Deed
A legal document by which title to property is conveyed.

Deferred Start
This allows the buyer to skip repayments during the first one, two or even three months of their mortgage. Skipped payments are spread over the remaining term of the mortgage. This is only available to first-time buyers and only with repayment mortgages.

Deposit
The amount of money a buyer must hand over on exchange of contracts (usually 10% of the agreed property price).

Disbursements
Expenses paid out by the solicitor on behalf of the purchaser (eg postage/couriers).

Discounted Mortgage
Many lenders offer discounts with their standard variable rate for a set period. This is a good way for first-time buyers to keep repayments lower in the early years of owning a home.

- E -

Endowment Mortgage
Only the interest on the amount borrowed is paid to the lender each month. A payment is also made into a savings/investment policy (eg a life assurance policy) each month so that at the end of the term of the loan, the initial principal borrowed can be repaid by the proceeds of this policy.

Equity
The amount of the property a person owns, ie the current value of the property less the mortgage.

Equity Release
Equity Release allows you to borrow up to 90% of the current value of your home, for a number of different purposes.

Estate Agent
A property agent who works on behalf of the seller, with the aim of getting the highest price for the property being sold.

Exchange of Contracts
At this point the buyer and seller are legally bound to the sale and purchase of the property.

- F -

Failed Valuation
This occurs when the lender turns down a mortgage application after reading the surveyor’s valuation report.

Fixed Rate Mortgage
This is a mortgage with payments that remain the same throughout the life of the loan, as the interest rate is fixed and does not change. Most Irish lenders offer fixed rates over 1, 2, 3, 5, 10, and up to 20 years.

Freehold
Straight ownership of property/land, ie there is no payment of rent and there is no limit on time for the owner.

- G -

Gazumping
A term used to describe a situation where the seller, having already accepted an offer from Party A, accepts a higher bid from Party B.

Ground Rent
A sum of money, usually paid annually, by leaseholders to the owner of a freehold.

Guarantor
A person who agrees to guarantee a loan, i.e. they promise to be responsible for the mortgage payments if the borrower cannot afford to pay them.

- H -

Home Bond Guarantee Scheme
A guarantee scheme with the objective of protecting new houses and apartments against structural defects and to ensure property standards are maintained in the building industry.

HB47
A certificate issued by Home Bond, confirming that the property has been registered and is covered under the Home Bond Guarantee Scheme.

- I -

Indemnity Bond
Most lenders may charge this upfront one-off fee should the buyer borrow in excess of 70-80% of the house value. This is to protect the lender against the borrower defaulting on the loan.

Indemnity Insurance
An insurance policy designed to protect the lender against loss in the event of the borrower defaulting and ceasing to repay his or her mortgage.

Index Linked
Allows you to increase your mortgage repayment by a set percentage each year. This reduces the amount of interest paid and reduces the mortgage term.

- J -

Joint Agents
When the seller employs two independent estate agents to sell their house.

- L -

Land Registry
The solicitor registers the buyer as the new owner of the property. The register is conclusive evidence of the title of the person whose name appears on it. Most agricultural land in Ireland is registered in the Land Registry.

Life Assurance
An insurance policy which pays out a fixed lump sum on the death of a policy holder. Often referred to as ‘Mortgage Protection’.

Loan to Value (LTV)
A formula used to evaluate the percentage of the value of the house borrowed from the lender, eg if the house is worth €100,000 and the borrower owes €50,000 on his/her mortgage, the LTV is 50%.

Leasehold
Leasehold gives a person the right of the possession, but not ownership, of a property for an agreed period of time (usually a fixed term stated on the lease). Ownership remains with the freeholder, but the lessee must pay ground rent annually and is subject to the terms of the lease.

Legal Fees
Solicitors charge a small percentage of the purchase price of a property for their services. This fee will depend upon the agreement made between the borrower and the solicitor.

- M -

Mortgage A long-term loan to finance the purchase of a property, with the property acting as security for the lender.

Mortgagee
The lender of the mortgage, ie a bank, trust company, credit union or other finance provider.

Mortgagor
The property buyer who takes out the mortgage.

Mortgage Term
The period over which the mortgage is to be repaid.

Mortgage Protection
An insurance policy, designed to pay off a fixed amount of money owing on a mortgage in the unfortunate event of serious illness or death of the borrower.

Maturity Date
The final day of the term of the mortgage. On this date the mortgage must either be renewed or paid off in full.

Mortgage Break
This allows the borrower to take a break from their mortgage repayments for 3 consecutive months in any one year. It is available up to 4 times over the term of the mortgage, once 3 years of satisfactory repayments have been made, and the Loan to Value (LTV) is 85% or less. One month notice of this is required.

Mortgage Interest Relief
This is a tax relief, which can be claimed on mortgage interest payments. People buying for the first time are entitled to the highest amount of relief.

- N -

Negative Equity
When the market value of a home falls to less than the balance of the mortgage. For example, if a person owes €100,000 on their house, but it is only worth €80,000, they are said to have negative equity of €20,000.

- P -

Pension Mortgage
This type of mortgage is available to self-employed people, people without a pension scheme and owner directors of companies. Monthly interest payments are made to the lender, and a pension policy is set up to pay off the mortgage when the mortgage holder retires. It can be very tax efficient.

Premium
This is the amount of money the borrower must pay to the insurer regularly (usually every month) for an insurance policy.

Principal
The original amount of the loan, ie the amount borrowed without any interest included on it.

Prepayment Clause
Allows the borrower to pay off all, or part, of their mortgage ahead of schedule. In some instances, paying off a mortgage early can be a good financial move. However, many lenders may charge for this.

- R -

Redemption
When the mortgage is repaid in full.

Repayment Mortgage
A mortgage where the capital and interest are paid off in monthly instalments from day one. It is similar to a personal loan, only over a longer term. Initially, it is mostly interest being repaid, with a smaller proportion of the payment being made against the loan. Over time, however, this ratio changes with the proportion of capital repayment increasing and interest reducing until the loan is paid off.

Remortgage
This is simply the replacement of an existing mortgage with a new one. This may occur by switching a loan to a more competitive and attractive mortgage provider. However, there may be extra fees charged by old and new lenders. The old lender might charge a penalty, while the new lender may charge an arrangement fee.

Retention
A condition of a mortgage whereby the mortgage lender holds back a portion of the advance, pending work to be carried out by the mortgagor.

- S -

Searches
When the solicitor carries out ‘searches’ to ensure that the person selling the property has a legal right to it and that there is no other interest shown on the title. It determines whether there is anything that might affect the title of the property.

Snagg List
When a new home is built the buyer is recommended to arrange for a surveyor to check if there are any defects which need to be fixed before they complete the sale. This list is then given to the builder to rectify.

Solicitor
Legal representative, who acts on behalf of a buyer or a seller in the purchase or sale of a house.

Split Rate
A split rate can set part of a mortgage at a fixed rate and the remainder at a variable rate, eg 50% fixed and 50% variable. If rates fall, the repayments on the variable part of the mortgage will reduce, and if rates rise, there is the security of knowing that only the variable payment is affected.

Stamp Duty

As of December 8th 2010, stamp duty has been reduced to a flat rate of 1% on properties values up to €1 million and 2% on any amounts over €1 million. There will no longer be a distinction between new versus second hand properties or first time and non-first time buyers. .

Structural Survey
A report detailing the condition of a property. It determines whether the property is structurally sound and lists any major and minor defects. This is recommended for second-hand properties and is great at identifying defects that would not be evident from a valuation.

Surety
Another name for a guarantor.

Surveyor
The person who carries out the structural survey of the property.

- T -

Term
The period for which a mortgage loan is taken out.

Tenure
Type of ownership of property eg freehold, leasehold.

Title
The legal right to ownership of a property.

Title Deeds
Documents which show the ownership of a property.

- U -

Undertaking
In the context of home loan lending, the word "undertaking" most frequently refers to the legally binding promise, which a borrower's solicitor gives to a lender to have all security documents signed by the borrower and to certify that the borrower's title to the property is good and marketable.

- V -

Valuation
This is a quick survey of a property by a valuer - the purpose is to establish its suitability for mortgage purposes and also to ensure it is not worth less than the proposed loan. A valuation should not be confused with a structural survey.

Variable Rate
An interest rate that can increase or decrease over the term of the loan in line with general movements in interest rates in the wider economy.