Glossary
of Terms
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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J -
Joint Agents
When the seller employs two independent estate agents to sell
their house.
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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.
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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.
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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.
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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.
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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.
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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. .
Property Value |
Rate of Duty |
First €1,000,000 |
1% |
Excess over €1,000,000 |
2% |
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.
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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.
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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.
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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. |