Brought to you by permanent tsb
Do you speak Mortgage?
Not many people do. Mortgage jargon can feel a bit like a foreign language, especially if you’re new to it. Don’t worry – our First-Time Buyer Jargon Buster cuts through the gobbledygook and will have you fluent in no time.
No, this is not some fancy new TV station. LTV stands for Loan To Value, which is the ratio between the value of your house and the value of your loan from the bank. If, for example, the value of your house is €200,000 and the value of your loan from the bank is €150,000, then the LTV is 75%.
Am I Pretty? Afraid not! (Although you are, of course.) AIP stands for Approval in Principle, which tells you whether the bank could possibly lend you the amount you want to borrow.
The most important part of this term is “in principle”. This is not an actual loan approval, just an indication from the bank that they would be willing to consider you for a mortgage. It gives you an idea of how much you can borrow and, most importantly, means you can start house hunting!
Approval in Principle typically lasts for 6-12 months. If you have not found a house within the allocated time it expires and you have to reapply so best get your skates on.
This is just a fancy word for all the legal work involved in transferring the title of a property from the seller to you. This is carried out by your solicitor and involves making sure that the property’s title deeds and the land it is built on can be legally transferred to you (and that the seller's Uncle Paddy isn't involved in a re-enactment of "The Field").
They will also conduct property searches to make sure that your new home is not at risk from flooding, subsidence, road planning or UFO visits. (OK, so we made the last one up.) They will work with your bank to pass the mortgage to the seller and they will also cast their eagle eyes over the contracts before exchanging them.
4. Sale Agreed
"Sale agreed" sounds pretty final but it doesn’t always mean you’re home and dry so try to reign in your excitement for now. (We know – easier said than done!) It’s important to remember that this is just one more step in the process.
You may have paid your booking deposit but the agreement is not legally binding until the contract is signed. Your booking deposit is fully refundable at this point if either party pulls out of the sale.
Once you’ve gone “Sale Agreed” on a house you will need to get a surveyor to check it and make sure it’s in good condition. A good surveyor will spot any electrical, damp or plumbing issues or any structural problems and save you from a lifetime of cold showers and flickering lights.
Before you drawdown your mortgage, you will need to get a Valuation to make sure that the property is worth what the seller claims it is. This is carried out by a professional valuer who will provide you with a Valuation Report of their findings.
7. Letter of Offer
The Letter of Offer is your formal mortgage offer from the bank and sets out the conditions of your loan. Unlike Approval in Principle, this is linked to a specific property and can only be applied for once you’ve put in an offer. It will be sent out to you and your solicitor once your mortgage application has been approved.
Gazumping is one of the nastiest things that can happen to a potential buyer and it’s one mortgage-related term we hope you will never have to hear. If you’ve gone “sale agreed” but after accepting your offer the seller got a higher offer from someone else and accepted it, you’ve been “gazumped”.
9. Stamp Duty
Stamp Duty is a tax paid to the government for transferring ownership of a property from the seller to you. The amount you pay depends on the type of property you’re buying (new or second hand) and the conditions of sale.
The current rate of Stamp Duty for residential property is 1% up to €1 million euros and 2% on anything over €1 million. For new builds you don’t have to pay Stamp Duty on the price of the house including VAT, just on the price before VAT. Your solicitor will calculate the VAT due when closing the sale and will pass it onto the Revenue Commissioners.
Once the bank is happy that you have met all their mortgage requirements and the contracts have been exchanged, they will send the mortgage cheque to your solicitor to drawdown the mortgage and you can complete the sale.
This is the best bit! Once all the forms have been filled, the contracts signed and all the money transferred, the seller will give the keys to your solicitor, who will then hand them over to you. Congratulations! You’re now the proud owner of your new home.
And they lived happily ever after.
Brought to you by permanent tsb
Check out our ‘Home Buyers HQ’ from saving to sale agreed, everything you need to know. If you're looking to start your own home buying journey you can book an appointment with the permanent tsb team today.
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