Jargon Buster

  • APR: Annual percentage rate.  The APR is the annual rate of interest you will be charged on a loan. It takes account of all the costs involved over the term of the loan, such as any set-up charges and the interest rate. You can use the APR to compare different loans, as long as you compare them over the same term, for example 3-year loans.

 

  • Average clause is a condition included in some home insurance policies that limits what you can claim if you are under-insured. For example, if the contents of your home are worth 30k but you insure them for just 15k you are under-insured by 50%. If your contents are damaged, destroyed or stolen, the most you will get from your insurance company is 50% of the total damage.
  • Capital or principal refers to the original amount you borrowed.
  • Conveyancing This is the term for the legal process where your Solicitor will transfer the ownership of property from seller to buyer.
  • Cost of credit The cost of credit shows you the real cost of borrowing. It is the difference between the amount you borrow and the total you will repay including the interest by the end of the loan period.
  • Credit history This tracks your record in repaying loans. Most lenders use a central agency, the Irish Credit Bureau to check your credit history. It keeps files on individual borrowers, and uses the information it gets from lenders to build up each borrower’s credit history.
  • Critical or serious illness cover.  This is an insurance policy that pays out a lump sum if you’re diagnosed with a specified critical illness covered by your policy.
  • Debt Consolidation. This means taking out a single loan to pay off a number of other unsecured loans.
  • Deeds These are the legal ownership documents of your home or property. Your lender holds them as security, until your mortgage has been paid off.
  • Default This is when a payment or series of payments on a loan or mortgage are missed.
  • Income protection (or permanent health insurance) Insurance that pays you a monthly income if you’re unable to work due to illness or injury. It will pay you up until you are able to return to work, or retirement, whichever is the sooner.
  • Irish Credit Bureau This is a credit reference agency that maintains information about individual borrowers’ credit histories. You can get a copy of your own details for a small fee by contacting the ICB.
  • Joint life policy This is a type of life insurance policy that covers two lives, such as you and your spouse, child or business partner. It pays out the benefit only once, either you or your partner dies while the policy is in force.
  • Letter of Offer Also called the ‘offer of advance’, this is a formal statement by your mortgage lender of the amount they are prepared to lend you.
  • Loan-to-Value (LTV) This is a percentage representing the amount owing on a mortgage relative to the market value of the property. You have a loan-to-value of 50% if your home is worth €500,000 and you owe €250,000.
  • Mortgage contract A document or group of documents containing all the terms and conditions laid down by your lender regarding your mortgage.
  • Mortgage deed The legal document that you sign when you obtain a mortgage.
  •  Mortgage Protection This is a form of life insurance product, which lenders must make sure you have in place when you take out a mortgage on your family home and if you are under 50 years of age. Your mortgage protection policy pays off the outstanding amount due on your mortgage if you die.
  •  Mortgage term The number of years on your mortgage.
  • Mortgagee The lender that lends you the money to purchase your property.
  • Mortgagor The person taking the mortgage.
  • Negative equity This term is used to describe a situation where the market value of your house is less than the balance you owe on your mortgage.
  • No-claims discount This is a percentage reduction you get on your home insurance premium. It is based on the number of years since you made a claim.
  • Permanent total disablement (PTD) PTD can mean two different things, depending on your insurance policy. It can mean you are permanently and totally unable to do your current job. Or, it can mean you are not able to do many normal daily activities, so you are permanently unable to work at any job.
  • Policy A policy is an insurance contract between you and an insurance company. Policy benefit Also known as the sum assured, this is the amount of money you could receive if you make an insurance claim that is successful.
  • Premium This is the amount you pay for an insurance policy. It can be a once-off lump sum or it can be a monthly or yearly payment.
  • Searches (property) Your solicitor will do searches to confirm that the seller of a property can pass ownership to you and that there are no outstanding judgments or debts against the property.
  • Serious illness insurance This policy pays a lump sum benefit if you are diagnosed as suffering from one of the serious illnesses specifically covered by your policy.
  • Stamp duty (property) This is a tax you pay to the government when you buy a property. A rate applies depending on the size and purchase price of the property and whether you are a first time buyer. For information on property stamp duty go to the Revenue website.
  • Sum assured Also known as the policy benefit, this is the amount of money you could receive if you have a successful insurance claim. With a life insurance or serious illness policy, you choose the sum assured.
  • Term insurance policy This is an insurance policy that pays out a fixed benefit if you die within a certain number of years (the term of the policy).
  • Terminal illness Insurance companies usually define terminal illness as an illness that is likely to result in a person dying within 12 months.
  • Terminal illness Benefit. This is a benefit included on some insurance policies.  It means that your life will be paid early if you are diagnosed as being terminally ill.
  • Title deeds Documentation that shows the ownership of the property.
  • Tracker mortgage This is a mortgage that is set at a fixed percentage or ‘margin’ above the ECB rate. For example, it could be set at the ECB rate plus one percentage point. So, if the ECB rate rises by a percentage point, so does your rate. It will also ‘track’ the ECB rate when this rate goes down.
  • Valuation fee This is the fee you pay to a professional valuer, such as an auctioneer or estate agent, to estimate a property’s market value.
  • Valuation report An estimate of the value of the property reported to the lender by the valuer nominated by them. The Valuers fee is usually paid for by the mortgagor.
  • Variable rate Variable rates rise and fall in line with general interest rate changes in the euro zone. Variable rates offer the most flexibility (over fixed rates) and allow you to pay off part or all of your loan without having to pay any fees or penalties.
  • Vendor This is the person selling the property.
  • Whole of life policy This type of life insurance policy covers you for your whole life. It pays out a benefit when you die – whenever that happens – as long as the policy is still in force. The benefit is not usually fixed and can vary over the life of the policy depending on the performance of the investment fund used by the policy. Also, your premiums are not fixed and may increase from time to time, for example every 10 years or so.

Jargon-Buster

  •  Deposit:  A mortgage deposit is the difference between the price of the property and the amount you can borrow.
  • Direct Debit: This is a payment taken from y our bank account by a third party to whom you have authorised.  You will complete a direct debit to repay your mortgage and life insurance monthly.
  • Dual life policy: This is a life insurance policy that provides cover for two people and continues after the first person dies. It pays out benefit on each death.
  • Equity:  Equity is the value of any assets you own after any debts are paid. In the context of your property, your equity refers to the difference between its market value and the mortgage you owe on it.
  • Equity release These are schemes that allow you to release some of the equity, or the value you have built up in your home, without having to move out or sell it. Certain schemes are available to older homeowners in the form of ‘life-time loans’ or ‘home reversions’. Equity release is also referred to as ‘re-mortgaging.
  • European Central Bank (ECB) The ECB is the central bank for Europe’s single currency, the euro. Its main task is to maintain the purchasing power of the euro and price stability in the euro area. One of the functions of the bank is to set interest rates for the 13 member countries in the euro zone.
  • Excess This is the first part of any insurance claim that you have to pay yourself. It is usually a fixed sum. Remember for home insurance a subsidence excess will be a much higher amount (typically €1,000).  Excess is often called ‘standard excess’ on many insurance policy documents.
  • Exit penalty Also known as an early encashment or exit charge, this is a charge applied by a financial institution when you cash in an investment or repay a loan within a set number of years or before a specific maturity date.

  • Fixed rate This means interest is fixed at a particular rate over a fixed time. If rates fall you can miss out on the benefits. If you want to pay off your full loan within the set time, you have to pay penalty fees.
  • Guaranteed insurability option: This is a benefit included on some life insurance policies.  It means that you have the option to take out additional life cover at certain stages, for example if you have children or your mortgage amount increases, without having to provide evidence of health.