Mortgage lending: Glossary

Did you know what a Volatile loan? Or interest during construction? Or would fall in the land registry case? A glossary of mortgage help.

The long-term loan, which will be returned by the borrower in constant credit rates (the so-called annuity). The annuity consists of interest portion and a principal component. During the term of the interest portion of the rate decreases, whereas the principal portion rises through the saved interest component.

The monthly payment remains constant through repayment of the loan. Principal and interest payments add up to a fixed amount – the annuity. Since the sum due is released gradually, the share of interest payment on the annuity over time is getting smaller. In contrast, the proportion of repayment performance increases, so that the annuity remains the same.

interest in construction

Borrowing costs are interest incurred during the construction period for the already paid part of the loan. In general, they are estimated at new construction projects where the loan is gradually paid depending on construction progress.

The ratio of loan amount to collateral value. The LTV refers to the lending value of a property, not to the purchase price. For example, a property costing 300,000 euros, and thus has a mortgage value of 270,000 euros (haircut 10 percent). With a loan of 150,000 euros, the loan to value ratio thus amounts to 56 percent.

collateral value

From the respective financial institution specified size. The collateral value generally corresponds to the value that can be achieved in normal circumstances for a later sale at any time. (Collateral value = market value minus eventual haircut).

Commitment interest

Payment for the services provided by the financial institution and not yet drawn down by the borrower on loans or loan parts.

loan rate

The loan rate is made up of two parts: the repayment rate and the interest rate performance. Since interest power is parallel to the decreasing debt less (rate is calculated on the respective current remaining debt), it might be worthwhile for the borrower to increase the eradication rate, after some time – the loan rate is adjusted, thereby interest can be saved.

effective interest

Price of a loan, in which nearly all price components are considered. Estimated costs, commitment interest, bank charges, however, among other things, are not included in the calculation. The effective interest rate allows you to compare different offers. The effective rate is calculated (PAngV) in the price regulation regulated.


Own assets that are used for real estate financing. To equity include Cash, Checks and savings deposits, securities, own unencumbered land, building society deposits and own work capitalized.

final repayment

The loan is not repaid in monthly installments, but at the end of the term with a sum. During the term of the repayment rates are instead in other systems (eg. As life insurance, pension insurance, building savings) invested. This type of repayment is suitable for those who filed a property for use by third parties and therefore can take tax breaks to complete.