| A mortgage is a method of using property | | | | |
| (real or personal) as security for the | | | | Bridging Loan This is a temporary loan that |
| payment of a debt. | | | | enables you to purchase your new property |
| | | | before you are able to sell your old |
| The term mortgage (from Law French, lit. | | | | property. |
| death vow) refers to the legal device used in | | | | |
| securing the property, but it is also | | | | Conveyance This is the legal document that |
| commonly used to refer to the debt secured by | | | | transfers ownership of unregistered land to |
| the mortgage. | | | | you. |
| | | | |
| In most jurisdictions mortgages are strongly | | | | Disbursements These are all the fees of your |
| associated with loans secured on real estate | | | | solicitors, such as stamp duty, land |
| rather than other property (such as ships) | | | | registry, search fees, etc. |
| and in some cases only land may be mortgaged. | | | | |
| Arranging a mortgage is seen as the standard | | | | Early Redemption Charge / Pre-Payment Penalty |
| method by which individuals or businesses can | | | | / Redemption Penalty This is the amount of |
| purchase residential or commercial real | | | | money you have to pay if you pay your |
| estate without the need to pay the full value | | | | mortgage in full before the time finished. |
| immediately. | | | | |
| | | | Equity This is the amount of your property in |
| In many countries it is normal for home | | | | the market minus all loans that it has. |
| purchase to be funded by a mortgage. In | | | | |
| countries where the demand for home ownership | | | | Freehold This means the ownership of a |
| is highest, strong domestic markets have | | | | property and the land. |
| developed, notably in Great Britain, Spain | | | | |
| and the United States. | | | | Land Registration This is a legal document |
| | | | that records the ownership of a property and |
| Participants and variant terminology | | | | land. |
| | | | |
| Each legal system tends to share certain | | | | Legal Charge This is a legal document that |
| concepts but vary in the terminology and | | | | records the data of the rightful owner of a |
| jargon they use. | | | | property or land. |
| | | | |
| In general terms the main participants in a | | | | Mortgage Deed This is a legal document that |
| mortgage are: | | | | stated that the lender has a legal charge |
| | | | over your property. |
| Creditor | | | | |
| | | | Mortgage Payment Protection Insurance This is |
| The creditor has legal rights to the debt | | | | the insurance that insures your mortgage |
| secured by the mortgage and often makes a | | | | payment arrives on time in case you are |
| loan to the debtor of the purchase money for | | | | unable to pay your mortgage. |
| the property. Typically, creditors are banks, | | | | |
| insurers or other financial institutions who | | | | Sealing Fee This is a fee made when the |
| make loans available for the purpose of real | | | | lender releases the legal charge over your |
| estate purchase. | | | | property. |
| | | | |
| A creditor is sometimes referred to as the | | | | Subject To Contract This is an agreement |
| mortgagee or lender. | | | | between seller and buyer before the actual |
| | | | contract is made. |
| Debtor | | | | |
| | | | Legal Aspects |
| The debtor[s] must meet the requirements of | | | | |
| the mortgage conditions (and often the loan | | | | There are essentially two types of legal |
| conditions) imposed by the creditor in order | | | | mortgage. |
| to avoid the creditor enacting provisions of | | | | |
| the mortgage to recover the debt. Typically | | | | Mortgage by demise |
| the debtors will be the individual | | | | |
| home-owners, landlords or businesses who are | | | | In a mortgage by demise, the creditor becomes |
| purchasing their property by way of a loan. | | | | the owner of the mortgaged property until the |
| | | | loan is repaid in full (known as |
| A debtor is sometimes referred to as the | | | | "redemption"). This kind of mortgage takes |
| mortgagor, borrower, or obligor. | | | | the form of a conveyance of the property to |
| | | | the creditor, with a condition that the |
| Other participants | | | | property will be returned on redemption. |
| | | | |
| Due to the complicated legal exchange, or | | | | This is an older form of legal mortgage and |
| conveyance, of the property, one or both of | | | | is less common than a mortgage by legal |
| the main participants are likely to require | | | | charge. It is no longer available in the UK, |
| legal representation. The terminology varies | | | | by virtue of the Land Registration Act 2002. |
| with legal jurisdiction; see lawyer, | | | | |
| solicitor and conveyancer. | | | | Mortgage by legal charge |
| | | | |
| Because of the complex nature of many markets | | | | In a mortgage by legal charge, the debtor |
| the debtor may approach a mortgage broker or | | | | remains the legal owner of the property, but |
| financial adviser to help them source an | | | | the creditor gains sufficient rights over it |
| appropriate creditor typically by finding the | | | | to enable them to enforce their security, |
| most competitive loan. Recently, many | | | | such as a right to take possession of the |
| consumers (particularly higher income | | | | property or sell it. |
| borrowers) are choosing to work with | | | | |
| Certified Mortgage Planners, industry experts | | | | To protect the lender, a mortgage by legal |
| that work closely with Certified Financial | | | | charge is usually recorded in a public |
| Planners to align the home finance | | | | register. Since mortgage debt is often the |
| position(s) of homeowners with their larger | | | | largest debt owed by the debtor, banks and |
| financial portfolio(s). | | | | other mortgage lenders run title searches of |
| | | | the real property to make certain that there |
| The debt is sometimes referred to as the | | | | are no mortgages already registered on the |
| hypothecation, which may make use of the | | | | debtor's property which might have higher |
| services of a hypothecary to assist in the | | | | priority. Tax liens, in some cases, will come |
| hypothecation. | | | | ahead of mortgages. For this reason, if a |
| | | | borrower has delinquent property taxes, the |
| Other Terminologies | | | | bank will often pay them to prevent the |
| | | | lienholder from foreclosing and wiping out |
| Like any other legal system, mortgage has | | | | the mortgage. |
| several jargons that may confuse some people. | | | | |
| Below are several mortgage terminologies | | | | This type of mortgage is common in the United |
| explained in brief for better understanding. | | | | States and, since 1925, it has been the usual |
| | | | form of mortgage in England and Wales (it is |
| Advance This is the money you have borrowed | | | | now the only form - see above). |
| plus all the additional fees. | | | | |
| | | | In Scotland, the mortgage by legal charge is |
| Base Rate In UK, this is the base interest | | | | also known as standard security. |
| rate set by the Bank of England. | | | | |