As educators, you excel at breaking down complex concepts into understandable language for others. Now it’s time someone did the same for you when it comes to mortgages.
Walking into a mortgage discussion unprepared can feel like stepping into a foreign country without knowing the language. Terms like “LTV,” “equity,” and “BER” get thrown around casually, leaving many nodding politely while secretly feeling overwhelmed.
This comprehensive guide aims to level the playing field by translating mortgage terminology into plain, straightforward language that you can confidently use during your home-buying journey.
Why Understanding Mortgage Terminology Matters
Before diving into our dictionary, let’s consider why understanding these terms is crucial for educators and others just like you:
- Empowered negotiations: Knowledge gives you confidence when speaking with lenders and estate agents.
- Informed decisions: Understanding the terminology helps you compare offers accurately.
- Avoiding costly mistakes: Misunderstanding terms can lead to unexpected costs or inappropriate mortgage products.
- Reduced stress: Familiarity with the language removes a significant source of anxiety from the process.
Now, let’s break down the mortgage world into simple, clear language.
The Essential Mortgage Dictionary: A-Z
A
Approval in Principle (AIP)
What it sounds like: An uncertain nod that might mean nothing.
What it actually means: A document from a lender indicating how much they might be willing to lend you based on initial information. It’s not a guarantee but gives you a ballpark figure for your house hunting. Think of it as a “probably yes” from the bank, subject to further checks.
Annual Percentage Rate of Charge (APRC)
What it sounds like: Just another percentage to worry about.
What it actually means: The yearly cost of your mortgage, including interest and standard fees, expressed as a percentage. It’s useful for comparing different mortgage offers on a like-for-like basis. Higher APR = more expensive loan over time.
Amortisation
What it sounds like: Something medical or possibly fatal.
What it actually means: Simply the gradual process of paying off your mortgage through regular payments. Each payment includes both interest and a portion of the principal (the original amount borrowed), so your debt decreases over time.
Arrears
What it sounds like: Something to do with your backside.
What it actually means: When you’ve fallen behind on your mortgage payments. Being “in arrears” means you owe money that should have been paid already—a situation best avoided.
B
Base Rate
What it sounds like: The bare minimum of something.
What it actually means: The interest rate set by the Central Bank of Ireland (or European Central Bank) that influences most other interest rates, including mortgages. When you hear “the ECB raised rates,” this is what they’re talking about.
BER (Building Energy Rating)
What it sounds like: Something a bear might have.
What it actually means: A certificate showing the energy efficiency of a property, ranging from A1 (most efficient) to G (least efficient). Better ratings mean lower energy bills and can qualify you for Green Rate Mortgages. Properties for sale or rent must have a BER certificate.
Bridging Loan
What it sounds like: Something to help you cross a river.
What it actually means: A short-term loan that “bridges” the gap when you need to purchase a new property before selling your existing one. These typically have higher interest rates because of their temporary nature.
C
Capital
What it sounds like: The city where the government sits.
What it actually means: The original amount of money you borrow for your mortgage, not including interest. Also known as the “principal.”
Closing Costs
What it sounds like: The bill for shutting down a business.
What it actually means: The various fees and expenses you pay when finalising your mortgage and home purchase, including legal fees, stamp duty, and valuation costs.
Collateral
What it sounds like: Additional benefit or bonus.
What it actually means: An asset (typically your home) that secures the loan. If you don’t repay the mortgage, the lender can take ownership of this asset.
Completion
What it sounds like: The end of a task.
What it actually means: The final stage of the home-buying process when money changes hands, and you legally become the property owner. Time to celebrate!
Conveyancing
What it sounds like: Transporting something from one place to another.
What it actually means: The legal process of transferring property ownership from the seller to the buyer. This involves preparing legal documents, conducting property searches, dealing with the Land Registry, and managing the exchange of contracts and funds. A solicitor or licensed conveyancer typically handles this process. For teachers and public sector workers with busy schedules during term time, understanding the conveyancing timeline (typically 8-12 weeks) helps with planning—especially if you’re hoping to move during school holidays.
D
Debt Consolidation Mortgage
What it sounds like: Throwing all your debts into one big mortgage pot.
What it actually means: Remortgaging to borrow extra funds to pay off other debts (like credit cards or loans), combining them into your mortgage. While this typically means lower monthly payments due to the lower interest rate and longer term, you could pay more interest overall since the debt is spread over a longer period.
Deposit
What it sounds like: Money you might get back someday.
What it actually means: The initial lump sum you contribute toward your property purchase, expressed as a percentage of the total property value. Higher deposits typically secure better interest rates.
Drawdown
What it sounds like: Reducing water levels.
What it actually means: The point at which your mortgage funds are released and transferred to the property seller. This happens on completion day.
E
Early Repayment Charge (ERC)
What it sounds like: A fee for being too organised.
What it actually means: A penalty for paying off your mortgage earlier than agreed, typically during a fixed or discounted rate period. Lenders charge this because they lose out on the interest they expected to earn.
Equity
What it sounds like: Fairness or justice.
What it actually means: The portion of your property that you truly own. Calculated as the property’s current value minus the outstanding mortgage balance. Equity increases as you pay down your mortgage and if your property value rises.
Equity Release Mortgage
What it sounds like: Setting your home’s value free.
What it actually means: A way for older homeowners (typically over 55) to access the value built up in their property without moving. You can take the money as a lump sum or in smaller amounts while still living in your home. The loan, plus interest, is repaid when you die or move into long-term care.
Exchange of Contracts
What it sounds like: Swapping paperwork.
What it actually means: The point when the sale becomes legally binding. Both buyer and seller sign contracts and the buyer typically pays a deposit. After this, neither party can withdraw without financial penalties.
F
First Home Scheme
What it sounds like: A plan to get your inaugural residence.
What it actually means: An Irish government initiative that helps first-time buyers bridge the gap between their mortgage and the cost of a new home. The scheme provides up to 30% of the property value (depending on location and circumstances) in exchange for a stake in your home.
Fixed Rate Mortgage
What it sounds like: A mortgage that doesn’t move.
What it actually means: A mortgage where the interest rate stays the same for an agreed period (typically 1-10 years), regardless of changes in the wider economy. Provides payment certainty but might mean missing out if market rates drop.
Freehold
What it sounds like: Getting something at no cost.
What it actually means: Ownership of both the building and the land it stands on, indefinitely. Contrasts with leasehold, where you only own the property for a specified period.
G
Gazumping
What it sounds like: A made-up word from a children’s book.
What it actually means: When a seller accepts a higher offer from a new buyer after already agreeing (but not legally committing) to your offer. Unfortunately legal in Ireland until contracts are exchanged.
Green Rate Mortgage
What it sounds like: An environmentally friendly loan with plants attached.
What it actually means: A special mortgage offering lower interest rates for energy-efficient homes (typically with BER ratings of B2 or better) or for financing energy-efficiency improvements. These provide dual benefits of lower mortgage payments and reduced utility bills.
Guarantor
What it sounds like: Someone who makes promises.
What it actually means: A person who agrees to cover your mortgage payments if you can’t. Often a parent or close family member who helps first-time buyers with limited credit history secure approval.
H
Help to Buy Scheme
What it sounds like: Someone lending a hand with your purchase.
What it actually means: An Irish tax refund initiative designed to help first-time buyers gather a deposit for a newly built home. It provides a refund of income tax and DIRT paid over the previous four tax years, up to €30,000 or 10% of the property value.
I
Interest-Only Mortgage
What it sounds like: Paying just the interesting bits.
What it actually means: A mortgage where you only pay the interest charges each month, not the capital. The full loan amount still needs to be repaid at the end of the term, through savings, investments, or selling the property.
Interest Rate
What it sounds like: How interesting something is, rated out of 10.
What it actually means: The percentage charged on your mortgage balance, determining how much you pay for borrowing. Can be fixed (staying the same) or variable (changing with market conditions).
L
Lender
What it sounds like: Someone who lets you borrow their stuff.
What it actually means: A financial institution (like a bank, building society, or specialized mortgage provider) that provides mortgage loans. Different lenders offer varied products, interest rates, and eligibility criteria. As a teacher or public sector worker, some lenders may view your stable government-backed income more favorably, potentially offering better terms or specialized products for your profession.
Loan-to-Value Ratio (LTV)
What it sounds like: A complicated formula you’d rather avoid.
What it actually means: The size of your mortgage as a percentage of the property’s value. For example, an €180,000 mortgage on a €200,000 property gives an LTV of 90%. Lower LTVs (meaning bigger deposits) typically secure better interest rates.
Loan Offer
What it sounds like: The offer of a lend of something.
What it actually means: The formal, written confirmation from a lender detailing the mortgage they’re willing to provide, including amount, interest rate, and terms. Usually valid for a limited time (often 3-6 months).
Local Authority Home Loan
What it sounds like: Borrowing a house from your council.
What it actually means: A government-backed mortgage for first-time buyers and certain other applicants who can’t secure sufficient funding from traditional lenders. It offers fixed interest rates for the entire mortgage term.
M
Mortgage Term
What it sounds like: How long you’re sentenced to mortgage payments.
What it actually means: The agreed length of time to repay your mortgage fully, typically 25-35 years. Longer terms mean lower monthly payments but more interest paid overall.
N
Negative Equity
What it sounds like: Something definitely bad involving money.
What it actually means: When your property is worth less than the mortgage secured on it. This typically occurs after property market downturns and can make moving home or remortgaging difficult.
O
Overpayment
What it sounds like: Paying too much for something.
What it actually means: Paying more than your required monthly mortgage payment. This reduces your outstanding balance faster and can significantly decrease the total interest paid over the term.
P
Portable Mortgage
What it sounds like: A mortgage you can carry around.
What it actually means: A mortgage you can transfer from one property to another when moving home, maintaining the same terms and conditions. Useful if you have a good rate you want to keep.
Principal
What it sounds like: The head teacher of your school.
What it actually means: The original amount borrowed, not including interest. As you make payments, the principal gradually decreases until the loan is fully repaid.
R
Redemption Penalty
What it sounds like: A fine for saving someone.
What it actually means: Same as an Early Repayment Charge—a fee for paying off your mortgage sooner than agreed, particularly during fixed-rate periods.
Remortgage
What it sounds like: Getting another mortgage when you already have one.
What it actually means: Replacing your existing mortgage with a new one, either with the same lender or a different one. People typically remortgage to get a better interest rate or release equity from their property.
S
Shared Equity Scheme
What it sounds like: Splitting ownership with someone else.
What it actually means: An arrangement where a third party (government or private) takes a stake in your property in exchange for helping fund the purchase. You own part of the property and pay rent on the rest, with options to increase your share over time.
Stamp Duty
What it sounds like: A tax on postage stamps.
What it actually means: A tax paid to the government when purchasing property over a certain value. The rate varies based on property price and whether you’re a first-time buyer.
Standard Variable Rate (SVR)
What it sounds like: The average changing rate of something.
What it actually means: The lender’s default interest rate, which you’re typically moved onto after any introductory fixed or discounted period ends. Usually higher than promotional rates and can change at the lender’s discretion.
Surveyor
What it sounds like: Someone who asks questions for research.
What it actually means: A professional who inspects the property before purchase to identify any issues or necessary repairs. Different levels of surveys are available, from basic valuations to comprehensive structural examinations.
Switcher Mortgage
What it sounds like: Something that changes from one thing to another.
What it actually means: A mortgage specifically designed for borrowers who want to move their existing mortgage from one lender to another without moving home. Switcher mortgages often come with incentives like cashback, fee waivers, or discounted rates to attract customers from competing lenders. For teachers and public sector workers, switching can be a smart way to take advantage of better rates or terms once your fixed period ends, potentially saving thousands over the life of your loan.
T
Tracker Mortgage
What it sounds like: A mortgage that follows you around.
What it actually means: A variable rate mortgage that tracks a specified interest rate (usually the ECB base rate) plus a fixed percentage. If the base rate goes up or down, your mortgage rate changes by exactly the same amount.
U
Underwriting
What it sounds like: Writing underneath something else.
What it actually means: The process lenders use to assess the risk of lending to you, examining your income, credit history, and the property value to determine whether to approve your application.
V
Valuation
What it sounds like: Determining how much something is worth.
What it actually means: An assessment of a property’s market value, usually arranged by the lender to ensure the property is worth enough to secure the loan amount. Basic valuations don’t necessarily identify structural problems.
Variable Rate Mortgage
What it sounds like: A mortgage that changes unpredictably.
What it actually means: A mortgage where the interest rate can change during the loan term, usually in response to economic conditions. Monthly payments can increase or decrease accordingly.
Putting It All Together: A Real-World Example
Let’s see how these terms work in a realistic scenario for a primary school teacher.
Lisa, a 29-year-old primary school teacher with 6 years’ experience, wants to buy her first home in Cork. After months of viewings, she finds a semi-detached house priced at €320,000 with a B1 BER rating, indicating good energy efficiency.
Lisa has saved €32,000 for a deposit (10% of the property value). She also qualifies for the Help to Buy Scheme, receiving a tax rebate of €20,000 based on taxes paid over the previous four years. With her deposit now effectively at €52,000, her LTV improves to 84%.
She approaches EDUC Mortgages for advice and receives an Agreement in Principle from a lender for a €268,000 mortgage. Because the property has a high energy rating, she qualifies for a Green Rate Mortgage with a 0.3% discount on the standard interest rate.
After finding the right property, a surveyor confirms it’s structurally sound, and the valuation matches the asking price. Lisa decides on a 4-year fixed-rate mortgage at 3.2% interest rate (with an APRC of 3.4% including fees), with a total mortgage term of 30 years.
The mortgage offer includes an early repayment charge of 2% if she repays the mortgage during the fixed period, but allows overpayments of up to 10% of the balance each year without penalty. Lisa plans to use her summer holiday pay for small overpayments to reduce the principal faster.
On completion day, the drawdown occurs, and she pays stamp duty and other closing costs amounting to €4,500. The house becomes her collateral for the loan.
After four years, her fixed rate expires, and she’s moved to the lender’s standard variable rate of 4.2%. At this point, she considers her options:
- Remortgage to another fixed-rate deal
- Switch to a tracker mortgage that follows the ECB base rate
- Explore a portable mortgage option as she’s considering moving to Dublin for a deputy principal position in two years
Lisa contacts EDUC Mortgages to talk through her options and what makes the most sense for her based on her current situation and her future goals.
Conclusion
Understanding mortgage terminology doesn’t just make the process less intimidating—it empowers you to make better financial decisions. As educators and public sector professionals, you’re already skilled at learning and communicating complex information. With this guide, you’re now equipped to engage confidently in mortgage discussions.
Remember that at EDUC Mortgages, we specialise in helping teachers and public sector workers navigate the mortgage maze. Beyond understanding the jargon, we provide tailored advice based on your unique employment circumstances, income structure, and career progression path.
If you ever feel overwhelmed by mortgage terminology or want personalised guidance, visit our website at https://educmortgages.ie or contact our team directly. We speak your language and can translate the complexities of mortgages into terms that make sense for your situation.
Your Next Steps
- Bookmark this guide for quick reference during your home-buying journey.
- Test your knowledge by explaining key terms to a colleague or partner.
- Begin your research by comparing different mortgage products using your new vocabulary.
- Contact Educ Mortgages for personalised advice tailored to your teaching or public sector position.
Remember, in the world of mortgages, knowledge truly is power—and now you have it.
Book a complimentary consultation with us today