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