Glossary
Advance
The amount of the mortgage loan to be issued by the lender.
Annualised Percentage Rate (APR)
The total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. This includes all costs involved, such as set-up charges, the term of the loan and the interest rate.
Annuity (or Repayment) Mortgage
Sometimes called a ‘capital and interest mortgage’. This is the most common type of mortgage. The monthly repayment is made up of the interest payment and the capital (original loan amount) repayment.
Appreciation
The amount a property has increased in value.
Approval in Principle
This is an offer from the bank that they will provide you with a loan based on the negotiated terms of your application following their review of your financial position. No funds are transferred to you with this approval, but it supports that the funds will be available to you when needed. The approval has an expiration period, usually six months.
APRC
APRC stands for Annual Percentage Rate of Charge. This is the yearly cost of your mortgage. It includes not just the interest on your loan but any other charges you have to pay, such as a valuation fee. It also helps if you compare like for like between mortgage providers.
Arrears
If you miss mortgage payments, you are ‘in arrears’.
Base Rate
The rate of interest set by the European Central Bank (ECB), which tracker rates and lenders’ standard variable rates typically follow.
Breakage Cost
Some mortgages (e.g. fixed rate mortgages) charge a fee if you pay back the loan early. This can vary, so check the original letter of approval or terms and conditions for the charge. This is also known as an ‘Early Redemption Charge’ (ERC).
Broker
A mortgage advisor offering advice on the range of mortgage deals available from various lenders,e.g.MyMortgages.ie.They are experts in the field, have good relations with the banks, and can secure very competitive rates, or offer you a range of rates, and a recommendation, based on what’s available from a number of lenders.
Building Control Amendments Regulations (BCAR)
Set up to achieve minimum standards in building practice in relation to design and construction methods.
Building Control Management Systems (BCMS)
This is the preferred means of electronic building management. It allows you to create, edit and review notices and certificates.
Building Energy Rating (BER)
This is an overall rating on the energy efficiency of a building. It is measured on a scale of A to G, with A1 being the best rating you can get for energy efficiency and G being the lowest.
Buy-to-let/Investment Mortgage
A mortgage for property that will be let by the borrower to tenants as a source of income and investment – the buyer will not live in the actual property.This mortgage may have different conditions than those applicable to owner-occupier loans.
Capital and Interest Mortgage
Sometimes called an ‘annuity’ or ‘repayment’ mortgage. This is the most common type of mortgage. The monthly repayment is made up of the interest payment and the capital (original loan amount) repayment.
Capital and Interest Payment
The monthly payment that covers the interest while reducing the total balance outstanding.
Capped Rate
A combination of a fixed rate and a variable rate. The interest rate is guaranteed not to rise above a set level (the ‘cap’) within the agreed period, but if the variable mortgage rate is below the capped rate then that is charged.
Central Bank of Ireland (CBI)
Its purpose is to serve the public interest by safeguarding monetary and financial stability and by working to ensure that the financial system operates in the best interests of consumers and the wider economy.
Central Credit Register (CCR)
A centralised system managed by the Central Bank of Ireland that collects and retains information about loans of €500 or more including credit cards, overdrafts, personal loans, mortgages, business loans, moneylender loans and loans from local authorities.
CHAPS Fee
A fee to cover the cost of electronically transferring the mort- gage funds to the borrower.
Conveyancing
The legal process of buying and selling property. This should be done by a solicitor to ensure the sale is free of issues.
Collateral
The security for a loan is described as collateral. In the case of a mortgage, the property is considered the collateral for the loan – and in the event of default by the borrower, the lender can realise their security by taking back the mortgaged property.
Cost of Credit
The difference between the amount you borrow and the amount you have to pay back, taking into account interest and other charges.
Credit Rating
The rating that lenders put on borrowers based on their credit worthiness – usually dependent on the borrower’s credit history.
Deposit
Paid on exchange of the contract – usually 10% of the purchase value of the house, though this can vary.
Deposit Interest Retention Tax (DIRT)
The tax chargeable on all interest payments.
Depreciation
Any decrease in the value of a property, e.g. from falling house prices.
Discount Rate Mortgage
An initial discount is offered, typically for a period of one or two years. In most cases discounted rate loans will be valid for a specific period of time rather than for the entire life of the loan.
Early Redemption Charge (ERC)
Some mortgages, e.g. fixed rate mortgages, charge a fee if you pay back the loan early. This can vary, so check your original letter of approval or terms and conditions for the amount. See ‘Breakage Cost’.
Endowment Mortgage
During the term of this mortgage only the interest on the mortgage is paid to the lender. A monthly payment is also made into an endowment policy (a separate investment policy) – the proceeds of which are designed to repay the mortgage debt and also have surplus funds when the policy expires.
Equity
The difference between what a home is valued at and the amount owed on the mortgage.
European Central Bank (ECB)
The European Central Bank (ECB) is the central bank for Europe’s single currency, the euro. It sets interest rates for the region. Mortgage interest rates can be affected by changes in the ECB rate; particularly tracker rates linked to the ECB.
Exit Fee
This is an administration fee payable to service providers when you fully repay your mortgage.
Fair Deal Scheme
A scheme to provide financial support to those that need long- term nursing-home care. It is operated by the Health Service Executive (HSE). Assets, such as savings and property, are taken into account when assessing each individual’s financial situation. They then make a contribution to the cost of care and the state pays the balance.
Family Home Protection Act
This is an Act that limits the ability of the owner to sell a family home without getting the consent of their non-owning spouse.
First Charge
A mortgage lender takes a first legal charge, which means that if a borrower defaults on mortgage repayments and the property is sold to repay debts, etc., the mortgage lender gets paid before any other interests on the property.
Fixed Rate Mortgage
A mortgage that is charged at a fixed rate for a set period. The rate payable does not change during the set period – regardless of changes in the lender’s standard variable rate.
Freehold
You own both the property and the land it stands on.
Gazumping
Gazumping occurs when a seller accepts an oral offer (a promise to purchase) on the property from one potential buyer, but then accepts a higher offer from someone else. It can also refer to the seller raising the asking price or asking for more money at the last minute, after previously orally agreeing to a lower offer. In either case, the original buyer is left in a bad situation, and has to either offer a higher price or lose the purchase.
Guarantor
A guarantor is a person other than the borrower who guarantees the mortgage repayments. Guarantors can help a borrower who has insufficient income to qualify for a mortgage.
Help-to-Buy Scheme (HTB)
This incentive is designed to assist those saving money for a deposit for their first home. It allows first-time buyers to gain a foothold on the property ladder. This is subject to application and eligibility criteria. (See Chapter 5.)
Home Reversion Plan
You sell a portion of your home to an equity release provider for less than its market value. Then, whenever you sell your house, the profits are split based on your ownership and that of the equity release provider.
Indemnity Bond
A fee required by some lenders where the amount of the loan exceeds 75% of the value or purchase price of the property – whichever is lower. The lender then purchases insurance, which covers them in the event of the borrower defaulting on the mortgage and the lender making a loss on possession and resale of the property.
Inducement
An incentive used to encourage an individual to avail of a product or service.
Interest Only Mortgages
With an interest only mortgage, the mortgage loan is not paid off during the mortgage term, but instead just the interest is paid to the lender and the original amount borrowed is paid in full at the due date of the loan term. An interest only facility can also be arranged for a given term, e.g. one year. In this case, the borrower only pays the interest for the first year and the full mortgage balance will still be outstanding after the interest only period. Generally, after this period, repayments will increase to include capital and interest so that the loan is repaid within the overall term of the mortgage.
Irish Credit Bureau (ICB)
Formed in 1963, the ICB is owned and financed by its more than 300 members, which are mainly financial institutions. The bureau’s database contains information on the performance of credit agreements between lenders (i.e. banks and building societies) and borrowers. Information is held for five years after a credit agreement is concluded.The ICB records may assist the lender to decide on the credit it offers. The ICB does not have decision-making power.
Joint Applicants/Joint Mortgages
This is where you hold property ownership rights equally with another person or persons. If one person dies, ownership reverts entirely to the surviving person or persons.This legal agreement supersedes any will the deceased may have made.
Land Registry
The official body that holds the details of property ownership in Ireland.
Leasehold
This is when you own the property but not the land it is built on for a specific number of years. Flats are usually owned on a leasehold basis. You may find it hard to get a mortgage if there are fewer than seventy years left on the lease of the property you want to buy. Leases are renegotiable, but the shorter the remaining term, the more expensive it will usually be.
Letter of Loan Offer
Once a mortgage application is approved, a formal letter of loan offer is sent to the borrower setting out the conditions of the loan. The borrower’s solicitor will also receive a copy with a request to proceed with the legal formalities.
Life Assurance/Life Insurance
Life insurance covers borrowers for a set term. Life assurance covers borrowers for their whole life. The Consumer Credit Act requires lenders to ensure that adequate life cover is put in place sufficient to cover the capital and clear the principal amount outstanding.
Lenders require confirmation that the life policy is in place before the drawdown of the mortgage. Life cover provides the funds for the mortgage loan to be paid off in the event of the borrower’s death. MyLifeCover.ie offer excellent policy options.
Lifetime Mortgage
When you borrow money against your home, providing it is the main residence you live in and that you retain ownership. Then, when you die or move into long-term care, the money from the sale of the house will be used to pay off however much of the lifetime mortgage is left.
Loan-to-Income (LTI)
LTI relates to how much money an individual can take out on loan from the bank based on their gross annual income.
Loan-to-Value (LTV)
LTVs are shown as percentages and represent the relationship between the size of the mortgage and the value of the property, e.g. a mortgage of €180,000 on a property valued at €200,000 would be shown as 90% LTV.
Local Property Tax
This is a self-assessed tax charged on the market value of residential properties in the state. People liable for this tax must pay it on an annual basis.
Lock-in Clause
This relates to fixed, discounted or capped mortgages, and the penalties associated with breaking the lock-in clause. It is usually attached to special deals and rates and may contain a clause that stipulates the borrower cannot repay a loan prior to a specified date.
MABS (The Money Advice and Budgeting Service)
This is Ireland’s free and confidential money advice service. It offers financial review services and expert guidance to those experiencing problems with money management and debt.
Maturity Date
The date the mortgage must be repaid in full, or by which a new agreement needs to be taken out.
Monthly Repayment
The amount you pay to your lender for your mortgage each month.
Mortgage
A long-term loan secured against the borrower’s property to finance the purchase of a property. Derived from a French word meaning ‘death pledge’.
Mortgage Term
The agreed length of time taken to make the full repayment of the mortgage. Mortgage terms can range from five to forty years.
Mortgagee
The lender providing the mortgage.
Mortgagor
The buyer who takes out the mortgage, i.e. the borrower.
Negative Equity
When the value of the property has fallen below the outstanding mortgage debt.
Offset Mortgage
A lending arrangement whereby the mortgage is linked to the borrower’s savings with the same lender. The savings balance is used to reduce the amount of interest charged on the mortgage.
Overpayment
This is when you pay extra, over and above your monthly mort- gage payment. You could choose to make a one-off lump sum overpayment or overpay a regular amount with your normal mortgage payment. Overpayments save you interest and will shorten your mortgage term. People often do this as their salary increases or if they come into money, e.g. inheritance.
Portability
Where an existing mortgage can be transferred between properties when you move house.
Payment Holiday
This is a period during which you make no payments on your mortgage. While you make no payments, interest will continue to be charged. This feature is usually only available on some mortgages. Refer to your terms and conditions to see if it’s an option open to you.
Pension Mortgage
During the term of this mortgage only the interest is paid monthly to the lender, with the principal due in full at the end of the mortgage term. Contributions are concurrently being paid into a pension scheme. At retirement the tax-free sum can be taken from the scheme to pay off the mortgage.
Pre-approval
When a lender gives approval in principle for a mortgage loan amount. The approval is based on income and other details from the applicant and is subject to certain conditions.
Principal
The sum of money borrowed from the lender – generally what is owed, not including the interest.
Rebuild Costs
The amount it would cost to rebuild your home if it is destroyed (by fire for instance). This is needed for insurance purposes and there are standard calculations to work it out.
Redemption
When a mortgage is paid in full – including interest to date and all charges. This usually occurs when moving to another property or when the end of the mortgage term is reached.
Redemption Penalty
An additional charge made by the lender if the mortgage is fully repaid within a pre-agreed period of time, e.g. if the mortgage is at a fixed interest rate and is paid off in total before the end of the mortgage term.
Remortgage
A process in which the mortgage on a property is moved from one lender to another.
Repayment Holidays
Repayment holidays allow you to spread your monthly repayments over a shorter number of months, for example, ten months instead of twelve, or postpone repayments for a time, for example three months. If you arrange to pay your mortgage over ten months, your repayments will be higher to cover the cost of the skipped months.
Service Fee
The fee charged by a lender who, with the customer’s written consent, requests details from their existing mortgage lender.
Stamp Duty
This is a tax payable on the transfer of property. The amount is based on the type and cost of the property and on whether it is a residential or non-residential property.
Split Rate Mortgage
A proportion of the mortgage is set at a fixed rate, and the remainder at a variable rate. If interest rates decrease, repayments on the variable portion of the mortgage decrease as well. If interest rates increase, only the variable payment is affected.
Standard Variable Rate (SVR)
A standard variable rate generally rises and falls in line with changes in interest rates. When the ECB rate rises or falls, the mortgage lender can increase or decrease the variable rate passing on some or all of the rate movement.
Statute of Frauds Ireland
This statute states that the sale and purchase of property in Ireland must be in writing and it also must include details such as where the property is, the price paid and who is involved in the transaction.
Switching
The process of changing mortgage provider to get a lower interest rate on your mortgage with a view to saving money on interest. Usually it involves a mortgage holder switching to a better rate with a new lender to get better value and save money.
Tax Relief at Source (TRS)
Tax relief for home mortgage interest is now provided at source by the lender. Either the lender reduces the mortgage repayment by the amount of the tax relief, or a credit is lodged into the account from which the repayments are made.
Term
The agreed length of time taken to make the full repayment of the mortgage. Mortgage terms can range from five to forty years.
Title
A title confirms who owns a property. There are Land Registry titles, which are registered with the state, and then there are deed titles, which are unregistered.
Title Deeds
Legal documents that provide evidence of the owner’s entitlement to a property.
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. This is commonly used for home improvements.
Tracker Rate Mortgage
A tracker rate is a set percentage (margin) above the ECB rate and so it ‘tracks’ changes in that rate. This margin is guaranteed glossary for the full term of the loan unless there is a material change in the terms of the loan. There is no relationship between the standard variable rate and the tracker rate. A tracker rate may be higher or lower than the bank’s standard variable rate.
This interest rate option suits those who wish to avail of a variable rate of interest but want a guarantee on the margin that will be charged for the life of the mortgage. The agreed margin as set out in the customer’s loan documentation will not change, even if the bank subsequently introduces a different tracker mortgage offering, at a margin which may be either higher or lower than agreed as per the loan contract.
Valuation Survey
A survey that can be requested by lenders so as to provide an independent professional valuation of the property.
Variable Rate
This means the interest rate can go up or down if your mortgage lender decides to change their standard variable rate.