The term mortgage refers to the legal tool used in securing the property, but it is also used to refer to the debt secured by the mortgage, the mortgage loan.

Mostly, mortgages are strongly associated with loans secured on real estate rather than other property and in some cases only land may be mortgaged. Putting together a mortgage is seen as the standard method by which individuals or businesses can purchase residential or commercial real estate without the need to pay the full value right away.

In many countries, it is usual for home buyers to get a mortgage. In Spain, the United Kingdom and in the United States where the demand for home ownership is highest, strong domestic markets have increased.

10 DOs and DON’Ts

Country
Mortgages in the United States
Mortgages in Canada
Mortgages in United Kingdom

Mortgage Rates
USA Rates
Canada Rates
UK Rates

Calculators
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Creditor

Anyone who loans money.

The creditor has legal rights to the debt secured by the mortgage and often makes a loan to the debtor of the purchase money for the property. Typically, creditors are banks, insurers or other financial institutions that make loans available for the purpose of a real estate purchase.

A creditor is sometimes referred to as the mortgagee or lender.

Debtor

A debtor means the person who owes payment against a secured obligation.

The debtor(s) must meet the requirements of the mortgage conditions set by the creditor in order to avoid the creditor enacting provisions of the mortgage to recover the debt. Usually, the debtors will be the home-owners, landlords or businesses who are purchasing their property by a loan.

A debtor is sometimes referred to as the mortgagor, borrower, or obligor.

Below are some terms explained in simple language.

Advance
This is the money you have borrowed including all the additional fees. 

Base Rate
This is the base interest rate. In the United States, this value is set by the Federal Reserve and is known as the Discount Rate. 

Bridging Loan
This is a temporary loan for the barrower to purchase a new property before he/she sells his/her current property. 

Conveyance
This is the legal document that transfers ownership of unregistered land. 

Disbursements
These are all the fees paid to the lawyers and governments, such as stamp duty, land registry, search fees, etc. 

Early Redemption Charge / Pre-Payment Penalty / Redemption Penalty
This is the amount of money due if the mortgage is paid in full before the time finished. 

Equity
This is the market value of the property minus all loans outstanding on it. 

Freehold
This means the ownership of a property and the land. 

 Land Registration
Also known as a Title. This is a legal document that records the ownership of a property and land. 

 Leasehold
This means the ownership of the property and land for a specified period, which may be sold separately from freehold, which may be owned by another person. 

 Legal Charge
This is a legal document that records the data of the rightful owner of a property or land. 

 Mortgage Deed
This is a legal document that states that the lender has a legal charge over the property. 

 Mortgage Payment Protection Insurance
This is a type of insurance, which ensures that the current mortgage payment will be paid if the borrower is unable to do so. 

 Private Mortgage Insurance
This is a type of insurance that the lender has the borrower take for loans over 80% of the appraised value. This will pay the lender only the owed portion up to 80% on a defaulted loan. 

 Sealing Fee
This is a fee made when the lender releases the legal charge over the property. 

 Subject To Contract
This is an agreement between the seller and the buyer before the actual contract is made.

Getting help choosing a mortgage
For most of us, buying our home is the biggest financial decision we ever make. The good news is that you’ll find plenty of help available, although you need to be clear what sort of help you’re being offered. When shopping around, make sure you are getting the help you need.

Repayment methods
The two major ways to repay your mortgage are “repayment” and “interest only”. With a repayment mortgage, you make monthly payments for an agreed period (the “term”) until you’ve paid the loan and the interest in full.

With an interest only mortgage, you make monthly payments for an agreed period but these will only cover the interest on your loan. You’ll normally also have to pay into another savings or investment plan that’ll hopefully pay off the loan at the end of the term.

1- Mortgage by demise

2- Mortgage by legal charge

Mortgage by demise
In a mortgage by demise, the creditor becomes the owner of the mortgaged property until the loan is repaid in full (”redemption”). This kind of mortgage takes the form of a conveyance of the property to the creditor, with a condition that the property will be returned on redemption.

This is an older form of legal mortgage and is less common than a mortgage by legal charge. It is no longer available in the UK, by virtue of the Land Registration Act 2002.

Mortgage by legal charge
In a mortgage by legal charge, the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to allow them to enforce their security, such as a right to take possession of the property or sell it. To protect the lender, a mortgage by legal charge is usually recorded in a public register. Since mortgage debt is often the largest debt owed by the debtor, banks and other mortgage lenders run title searches of the real property to make certain that there are no mortgages already registered on the debtor’s property which might have higher priority. Tax liens, in some cases, will come ahead of mortgages. For this reason, if a borrower has delinquent property taxes, the bank will often pay them to prevent the lien holder from foreclosing and wiping out the mortgage.

This type of mortgage is common in the United States and, since 1925, it has been the usual form of mortgage in England and Wales (it is now the only form - see above).

In Scotland, the mortgage by legal charge is also known as standard security.

Foreclosure and non-recourse lending
In most jurisdictions, a lender may foreclose the mortgaged property if certain conditions - principally, non-payment of the mortgage loan - obtain. Subject to local legal requirements, the property may then be sold. Any amounts received from the sale are added to the original loan. In some jurisdictions, mortgage loans are non-recourse loans: if the funds earned from sale of the mortgaged property are insufficient to cover the outstanding debt, the lender may not have recourse to the borrower after foreclosure. In other jurisdictions, the borrower remains accountable for any remaining debt. In nearly all jurisdictions, specific measures for foreclosure and sale of the mortgaged property apply, and may be firmly regulated by the relevant government; in some jurisdictions, foreclosure and sale can take place rather fast, while in others, foreclosure may take many months or even years. In many countries, the ability of lenders to foreclose is very controlled, and mortgage market development has been notably slower.

There is a lot more about mortgage insurance.

Protecting income or borrowing
As you probably know, once you take out any kind of loan, you have to make all the payments in full, and on time. If you fail to do so, you could lose your home if it’s a mortgage or your loan is secured on it. It can also affect your credit.

Sometimes, however, the unexpected happens. For example, you might lose your job through redundancy, or find yourself unable to work due to long-term sickness. By law, an employer must pay most employees statutory sick pay for up to 28 weeks though this will probably be a lot less than full earnings. After that, you would probably have to fall back on State benefits. These are limited and means-tested which may mean you won’t qualify. If you are self-employed, you have no employer to help, so you would have to turn to the State.

This is when your insurance will protect you or your family’s income. Listed below are some examples of products and why you might find them useful:

What do you need to know?
You need to read your insurer’s terms carefully, not just for the range of illnesses they cover but also their type. For example, while a heart attack may be covered, a cardiac condition such as angina may not, also not all types and stages of cancer are covered.

For a claim to be successful, you normally have to survive a month following the diagnosis.

PHI products have a waiting period before they will start to pay out. The longer you agree you’ll wait, the lower your premiums, so it is important you find out what income you can get from your employer, or other insurance (such as mortgage payment protection).

This cover might not be available to you if you have existing health problems or a dangerous job.

What do you need to know?
With some types of cover, called Pension Term Assurance (PTA), you used to get tax relief on the premiums paid into it. This may no longer be available on policies taken out after December 2007.