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