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Do you know your LTV from your APR?

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21 Nov 2019

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Do you know your LTV from your APR? Are you a little in the dark over what it all means? Here’s our handy mortgage jargon buster.

As soon as you tell anyone you’re applying for a mortgage you’ll be hit with everyone’s helpful advice and inundated with people showing off their banking jargon. While your AIB mortgage advisor will explain everything to you in person, here’s a glossary of the terms you’ll hear before you get started.

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LTV, The Loan to Value Ratio

This is basically the difference between the value of the property and the amount of your mortgage – so what your loan is after your deposit.. For example a mortgage of €270,000 on a €300,000 property would be 90% LTV

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LTI, The Loan to Income Ratio

Like the LTV, this is a ratio but this time it’s Loan to Income. The LTI on owner occupier mortgages can’t be more than 3.5 times the borrower’s gross income. For example if you earn a salary of €50,000, this would mean that you can get a mortgage of approximately €175,000. There are some exceptions available but it’s a good rule to follow when looking at how much you might be able to get

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Deposit

A bank can’t lend you all of the money needed to buy a home, so you need to have enough money saved to pay a deposit. As a First Time Buyer you will need a deposit of at least 10%. However, this will be more if you’re moving to another home, buying to rent, or buying a one bed apartment

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Fixed Rate and Variable Rate

These are the different types of interest that can be applied to your mortgage. Your AIB mortgage advisor will go through all these with you

You can choose between a fixed interest rate, a variable one or a combination of both. A fixed rate mortgage has a rate of interest which doesn’t change for a set period of time, so you know exactly how much you pay every month. A fixed rate makes it easier to budget for payments. But remember it’s fixed for a certain time like three, five or seven years and if you change it before the end, we may charge you a fee

A variable rate mortgage has a rate of interest which can change. We will always tell you in advance if it is going to go up or down and how your monthly repayment amount will change as a result. A split rate mortgage is a combination of both

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12 Month Approval in Principal

Once your deposit is in place you can apply for a mortgage and receive an Approval in Principle. This is when we agree, in principle, to give you a mortgage, based on the information you’ve given us. Then you’ll know how much you have to spend on your new home. There will be more conditions you’ll have to meet, but we’ll make these clear so you’ll know what else you have to do before we can lend you the money. Unlike other mortgage providers, AIB’s Approval in Principle lasts for 12 months which means you’re not under pressure to find your dream home

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Credit Rating

This is your financial track record and repayment history. Before applying for your mortgage, it is important to sense check all other loans and bills you might have, and ensure your repayments are ticking over as they should be!

 

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Allied Irish Banks, p.l.c. is an authorised agent and servicer of AIB Mortgage Bank in relation to the origination and servicing of mortgage loans and mortgages. Allied Irish Banks, p.l.c. and AIB Mortgage Bank are regulated by the Central Bank of Ireland.

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