#Open journalism No news is bad news

Your contributions will help us continue to deliver the stories that are important to you

Support The Journal
Dublin: 5°C Saturday 4 December 2021

Make sense of mortgage jargon

We decode the words and phrases you’ll run into when buying a home.

1. Base Rate

A rate of interest set by the European Central Bank (ECB), which tracker rates and lenders’ standard variable rates usually follow.

2. Fixed Rate

A mortgage where the interest rate stays the same for a specific period (e.g two or five years) even if the base rate changes in the meantime.

3. Variable Rate

This means the interest rate can go up or down if your mortgage lender decides to change their standard variable rate.

4. Tracker Rate Mortgage

The mortgage interest rate is set at a fixed percentage above the European Central Bank (ECB) base rate. The interest rate payable will rise and fall in line with changes to the European Central Bank base rate.

5. LTV

LTV means Loan to Value. It’s the size of your mortgage as a percentage of the value of your property. For instance, if you have a €50,000 mortgage and your home is worth €100,000, your LTV is 50%.

6. Maturity Date

The date the mortgage must be repaid in full, or by which a new agreement needs to be taken out.

7. Freehold

You own both the property and the land it stands on.

8. Leasehold

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 70 years left on the lease of the property you want to buy. Leases are renegotiable, but the shorter remaining terms, the more expensive it will usually be.

9. 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 one. In either case, the original buyer is left in a bad situation, and either has to offer a higher price or lose the purchase.

10. Guarantor

A third party who agrees to meet the monthly mortgage repayment if you are unable to. This is more common with first-time buyers, with the guarantor likely to be their parent or guardian.

11. Early Redemption Charge (ERC)

Some mortgages, such as a fixed rate mortgage, 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. This is known as and Early Redemption Charge (ERC).

12. Equity

Is the difference between the current value of your home and the amount outstanding on your mortgage.

13. Negative Equity

When the value of your home falls below the amount of your mortgage.

Sponsored by:

Ulster Bank

Read next:

COMMENTS