Applying for a mortgage is a major life milestone – one that most of us will face at some point when we’re just steps away from owning a home.
An adulting initiation rite, if you will.
However, we can’t help feeling a little intimidated when it comes to approaching the application process, with some of the jargon leaving us more confused than when we started.
Here’s the good news – it’s not as complicated as it seems.
To prove it, we’ve teamed up with AIB to translate those pesky mortgage terms into plain English – so you can navigate the process smoothly without having to Google every second word.
Jargon: “Annual Percentage Rate (APR)”
Plain English: Basically, what it’s actually costing you to borrow money over a year. It includes interest rate and other fees, averaged out over the full term of your mortgage.
Jargon: “Approval in Principle”
Plain English: We like this phrase – it’s a good thing when you see this phrase. It means that the bank has given you approval for your mortgage loan based on the information you’ve given them in your application, and subject to certain conditions. *Yay*.
Jargon: “Buy-to-Let Mortgage”
Plain English: This mortgage is for a property that you plan on renting out to tenants rather than living in yourself. It just has a different set of conditions than a standard ‘owner occupier’ mortgage.
Plain English: You’ve heard this one in the movies. It actually couldn’t be simpler – it’s basically anything that’s security for a loan. So in this case, the property you have taken the mortgage out on is the collateral.
Jargon: “Credit Rating”
Plain English: Ah, this old nugget. It’s essentially a score that determines how likely you are to pay back a loan. It will contain details of your current loans and loans you’ve had within the last year, and it’s one of the things used to gauge how suitable you are for a mortgage loan.
Jargon: “Deferred Start”
Plain English: Just like deferring a term at college – this is the option to delay your mortgage repayments for the first six months to catch up with yourself. At the end of the deferred start, the repayment amounts will be increased so that your mortgage is still repaid within the agreed time-frame.
Plain English: This is what you save before you buy a house. It’s the amount of money you must pay up front to secure your mortgage – for First Time Buyers, it’s a minimum of 10% of the purchase value of the property.
Plain English: This is the difference between what you owe on the mortgage and the value of the property you’ve bought.
Negative equity means the value of the house has dropped below the outstanding mortgage debt.
Jargon: “Fixed Rate Mortgage”
Plain English: Charges on this mortgage loan are fixed and last for a pre-agreed length of time – so the cost of your loan won’t decrease (aww) but it also won’t increase (nice) and the rate payable won’t change over the agreed mortgage term.
Jargon: “Letter of Loan Offer”
Plain English: You’ll be happy to see this one come in the door. You’ll receive it when your mortgage application is approved (!), and it will outline all the official loan conditions.
Jargon: “Loan to Value (LTV)”
Plain English: This term is related to equity (above). It’s essentially the percentage of the loan to the current market value on the property you’ve taken the mortgage out on.
e.g. A mortgage of €207,000 on a property valued at €230,000 would be 90% LTV.
Jargon: “Payment Holiday”
Plain English: This is when you take a break from mortgage repayments for a period of time – it’s usually used for big life events such as maternity leave, education fees or home improvements – and not so much for a holiday to Tenerife as the name may suggest. Obviously, your repayments will be higher when you resume payment to cover the costs of the break.
Are you thinking about buying your first home? We’ve got your back. We’ve teamed up with AIB to bring you all you need to know about applying for a mortgage and buying your first home in our one-stop-shop mortgage hub. Keep an eye on the mortgage hub to guide you through your journey!