Glossary of Terms

- A - 

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.

Chain

Where the seller needs the proceeds from 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 added to the capital sum and repayments spread over the remaining term of the mortgage. This is only available to first-time buyers and only with repayment mortgages. Best to be avoided as you are paying interest on interest.

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

Some lenders may 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 -

Equity

The monitory amount of the property a person owns (being 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. Many 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. Lenders are not keen on Guarantors as they like to see that the mortgage applicants can financially stand on their own merits.

- H -

Help to Buy (HTB) Incentive

If you are a first-time buyer, this incentive will help you with the deposit required either to buy or build your new home. The incentive provides you with a refund of the Income Tax and Deposit Interest Retention Tax (DIRT) that you may have paid over the previous four tax years up to a maximum of 30,000 Euro .

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 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 €300,000 and the borrower owes €150,000 on their 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 paid off in full or extended.

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 by the lender .

Mortgage Interest Relief

Revenue will allow you claim tax relief on the amount of interest actually paid by you within a tax year /calendar year on a qualifying home loan mortgage. This relief is subject to rates and thresholds depending in on the year you purchased the house. It is simply a tax relief, which can be claimed on mortgage interest payments. You can claim Mortgage Interest Relief on interest paid by you on a loan used to either purchase, develop, repair or improve your home.

- N -

Negative Equity

When the market value of a home falls below the mortgage loan balance . For example, if a person owes €280,000 on their house, and the house valued at €250,000, they are said to have negative equity of €30,000.

- P -

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, some lenders may charge for this depending if you are on a fixed rate. There are no redemption penalties if redeeming you mortgage /trading up whilst you are on a variable rate .

- R -

Redemption

When the mortgage is repaid in in part or a ‘total redemption’ when repaid in full.

Rent a Room Relief

Rent a room relief allows you earn up to €14,000 per year tax free if you rent out a room / rooms in your family home to private tenants. A converted garage or ‘self contained’ unit such as a flat in the basement of your home may also qualify for this tax relief. The rental income received must be included in your annual income tax return. To qualify for ‘rent a room relief’ your home and you must occupy it as your sole residence /home during the year of assessment.

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 are fees charged such as legal and valuation fee.

Retention

A condition of a mortgage whereby the mortgage lender holds back a portion of the advance, pending works to be carried out to the property 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 purchase. This list is then given to the builder to rectify before your mortgage funds issue.

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, for example 50% fixed / 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 and 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 survey of a property by the lenders valuer - the purpose is to establish its suitability and is a valuation for mortgage purposes (ensures it is not worth less than the proposed loan) . A mortgage 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 Euribor rate and general movements in interest rates in the wider economy.

How does Euribor affect my mortgage?

In Europe, the Euribor, being the rate at which Banks lend to one another is a central component of a variable rate mortgage. If it changes then so will the monthly repayment that you pay to your mortgage lender. Monetary policies which are set out by Central Banks (like the ECB) have a significant bearing on the Euribor rate.