Mortgage Terms Explained

Mortgage

Basically it’s a loan that it is secured on a property. It is used to guarantee the payment of a debt and it automatically becomes void once the debt has been paid.

Approval in Principle 

A document from a Mortgage Lender which shows how much they will lend you. This is subject to meeting certain criteria

Loan Offer

A Formal Loan offer will be sent to you outlining the Terms and Conditions of the mortgage contract. A legal pack will also be sent to your solicitor.

Variable Interest Rate

This interest rate can change during the course of the Mortgage depending on any changes in the ECB (European Central Bank) rates. The rate can also move if the bank feels market conditions necessitate change. This means that your monthly payments can go up or down.

Fixed Interest Rate

You can chose to have your payments fixed for a specific term (usually 2-5 years). This means that your payment will stay the same during that term no matter whether interest rates go up or down. Often there are penalties for breaking a fixed rate. This would only happen if you wanted to pay off the mortgage during the fixed term or refinance the property.

Monthly Repayment

The amount you pay each month for your Mortgage.

 

Mortgage Term

The number of years over which a Mortgage is taken out.

LTV – Loan to Value Ratio

To work out the LTV ratio, you divide the Mortgage amount by the purchase price of the property and multiplying by 100. This can be an important number because if the LTV is low enough you may get a better interest rate.

Equity

The amount of the property that you own. You calculate this by subtracting the amount outstanding on your Mortgage from the value of property.

Equity Release

This means borrowing money which is secured on the equity in your home.

Negative Equity

This happens when the value of the Mortgage is greater than the market value of the property.

 

Valuation Survey 

This is an inspection of the property carried out for the Lender to make sure you are paying market value for it. It is generally done by an independent Surveyor.

Structural Survey

If you a buying a second hand house, it is usually a good idea to get a Structural Survey done. This involves a full inspection of the property. It is carried out by a qualified Surveyor, usually an Engineer. The Surveyor provides you with a report which tells you if the property is structurally sound.

Conveyancing

The legal process of buying and selling property. This is usually carried out by two solicitors, one operating on behalf of the Buyer and one on behalf of the Seller.

Contracts

The legal agreement between the Seller and the Buyer.

Exchanging Contracts

The Buyer signs the contract and sends it to the Seller, the Seller signs it and sends it back. This is done through the solicitors. At that point the contracts are considered to have been exchanged. Both the Buyer and the Seller are now legally bound to the sale.

Title Deeds 

These are the documents that show who the owner of a property is and any burdens or charges on the property.

Searches

These are carried out by your Solicitor to make sure that the person selling the property has the legal right to do so.

Stamp Duty

This is a tax that you must pay to the Irish Government when you buy a property.

                     

       Warning: If you do not keep up your repayments you may lose your home.