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Mortgage Bull Buster

mortgage protection jargon

When you’re buying a house, there’s an awful lot of high-falutin bullshit to wade through.

Plenty of terms that the average Joe just don’t know.

So to help you survive the onslaught, we’ve created a Mortgage Bullshit Buster, or MBB if you will.

Without further ado…

What is a mortgage drawdown date?

Your mortgage drawdown date is the day you “draw-down” or cash that big fat mortgage cheque from the bank. It’s also known as cheque issue date. In reality, you’re not going to be cashing a giant cheque like a LOTTO winner.

3 numbers would be nice sometime.

Instead, on the drawdown date, the bank transfers the mortgage funds electronically to your solicitor’s bank account.

You need to have your mortgage protection and home insurance in place before your drawdown date.

And your drawdown date comes before your closing date…

What is the mortgage closing date?

This is THE BIG DAY.

It’s when you become a homeowner, you get your keys and you can move in.

What is a letter of indemnity?

This has to do with your home insurance.

If you’re getting a mortgage, you have to take out home insurance in case the house goes up in smoke.

Your home insurance provider will issue a letter of indemnity naming your lender (the bank) on the home insurance policy.

You give this letter to your bank and they tick a box.

What is a confirmation of assignment letter?

This is similar to a letter of indemnity but has to do with your life insurance/mortgage protection.

When you’re getting a mortgage, the bank needs the security of knowing the mortgage will be cleared if you die. To prove you have life insurance, they require a copy of your life insurance policy.  They also make you sign a Deed of Assignment which basically transfers the ownership of your policy to them. If anything happens to you, they get the proceeds of the policy.

Seems fair, wha.

Your insurer will issue a Confirmation of Assignment letter to your bank proving ownership has been transferred to the bank.

Your bank ticks another box.

Quick quiz – say you add serious illness cover to your life insurance policy – Who gets the proceeds of a serious illness claim?

What is a mortgage moratorium?

Now there’s a fancy word.

All it means it “payment break”.

Let’s say you get a 6-month moratorium at the beginning of your 30-year mortgage. It means you won’t have to pay a cent for 6 months.

Sounds dreamy – think of all the stuff you could buy from IKEA in those 6 months.

Of course, over the remaining 29.5 years of the mortgage, the insurer will hike your repayments to make sure you pay it off in full.

So maybe not as dreamy as it first sounds.

What’s a mortgage protection waiver?

If you’re:

your bank, at their discretion, may offer you a mortgage protection waiver.

This means you can proceed with your mortgage without having life insurance. You have to sign a declaration stating you understand the consequence of getting a mortgage without life cover. In plain English, if you die, your partner will have to stump up all the mortgage repayments on their own or they will lose the house.

What is a first-time buyer mortgage exemption?

If you’re lucky enough to get an exemption, this means the bank will either let you borrow more than three-and-a-half times your salary, or give you a mortgage with a smaller deposit than the Central Bank rules stipulate.

Unfortunately, COVID has put a pause on exemptions so you may have to wait until 2021 or until COVID fecks off.

What’s conveyancing?

It’s the legal work involved in transferring the ownership of the property from the seller/vendor/property own to you, the buyer. You shouldn’t need to worry about this, pay a competent solicitor and they will take away all the headache here.

Don’t go cheap when employing a solicitor, as discount conveyancing may come back to bite you on the arse if the proper checks have not been carried out.

Look for recommendations from friends who have been through the process before.

DO NOT google “cheap conveyancing”.

PRO TIP If you do google it, avoid all the firms you find advertising “cheap conveyancing”.

It’s cheap for a reason people.

What costs are associated with purchasing a property?

Legal Fees/Conveyancing

Fees can start at €1,000, not including VAT and outlay. Get recommendations and shop around. Remember what I said about cheap.

Valuation:

The standard valuation fee is €130.

Surveyors Fees:

You don’t need a structural survey but look, you’re paying hundreds of thousands of euro for a gaff. Isn’t it worth paying €400 to make sure it’s not going to fall down in a few years?

Stamp Duty:

Pretty simple:

stamp duty on house purchase ireland

If your dream homes has a purchase price of €375,000, you will pay 1% of this which is €3750.

Insurances

👋

Ah finally, my time to shine.

Two types of insurance are mandatory

House insurance

Shop around for this stuff or you could end up paying through the nose.

If you’d like a quote, we can help, simply complete this questionnaire

Life insurance/Mortgage Protection

It’s easy to get confused about the type of life insurance you need when you’re getting a mortgage.

Your loan offer says you need life insurance cover, when in fact, all you need is a type of life insurance called mortgage protection.

This is a type of life insurance where your cover reduces over time (the same way your mortgage reduces as you pay it off). God forbid, you shuffle off this mortal coil unexpectedly, this policy will clear the outstanding balance on your mortgage.

Mortgage protection costs a lot less than life insurance so make sure you’re not hoodwinked into buying an expensive policy.

You don’t need life insurance when getting a mortgage

Over to you

Hopefully, that’s made things a little clearer.

Unfortunately, it’s impossible to avoid jargon when you’re getting a mortgage but if you are ever confused by the terminology, don’t be afraid to stick your hand up and ask a question. Some of us old-timers are in the job so long that we forget what it was like to know nothing about mortgages.

The Curse of Knowledge is real.

Best of luck buying your new home,  if you need any insurance-y help, let me know or complete this questionnaire and I can email you a no-obligation recommendation on the types of insurance you should be looking at.

Nick | 05793 20836 | nick @ lion dot ie

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