Mortgage Terminology That Everyone Should Know
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
Essential Mortgage Terms You Should Know
Overview
Understanding mortgage terms is crucial when exploring mortgage options or reviewing documents. Misinterpreting these terms can lead to unintended agreements. Here's a guide to some key terms you should know before signing any documents.
1. Creditor
The creditor is the entity that holds or sells the property's deed. Typically, this is a bank, mortgage company, or lending institution. They have the legal rights to sell or mortgage the property. Sometimes referred to as the mortgagee or lender.
2. Debtor
The debtor is the individual or party purchasing the property. If you're buying, you're the debtor. You must prove your ability to repay the mortgage before the creditor approves the loan.
3. Conveyance
Conveyance refers to the legal process of transferring property ownership from the creditor to the debtor.
4. Hypothecation
Hypothecation is the debt created when the debtor signs the mortgage and pays the seller. It's essentially the financial obligation tied to the mortgage.
5. Redemption
Redemption occurs when the debtor fully pays off the mortgage or debt.
6. Mortgage by Demise
In a mortgage by demise, the creditor owns the property until the debt is completely paid. Although this type of mortgage was common in the past, it's now rarely used and is even banned in some regions.
7. Mortgage by Legal Charge
This is the most common type of mortgage today. While the debtor legally owns the property, the creditor maintains certain rights to ensure repayment.
Conclusion
There are numerous other mortgage terms you may encounter. Being familiar with these key terms helps clarify what you're agreeing to. Ensure you're well-informed before meeting with a mortgage broker to sign any documents. Understanding these terms can guide you confidently through the mortgage process.
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