When you're looking for a mortgage or reading about one, there are a few terms that are crucial to how you understand the paperwork. If you don't know all the terms, you might not understand what the document is saying and sign something you didn't mean to. Before you sign anything, you should know the following basic terms:
- Creditor: This is the person selling or holding the deed to the property you want to buy. The law says that they own the property and have the right to sell it or put a mortgage on it. Usually, this is the mortgage company, bank, or another place that lends money. Sometimes, the creditor is also called the "mortgagee" or the "lender."
- The buyer of the property is called the "debtor." If you want to buy the property, you are the one who owes the money. Before the creditor will sign the mortgage, this person must make sure that they can pay back the loan.
The legal transfer of property from the creditor to the debtor is called "conveyance."
- Hypothecation is just a fancy word for the debt that the mortgage creates. When the debtor signs the mortgage and gives the money to the seller of the property, they get this.
- Redemption: This is when the mortgage, or debt, is paid off in full.
- A mortgage by legal charge is the most common type of mortgage today. In this case, the debtor (or buyer) is legally the owner of the property, but the creditor still has enough rights over the property to make sure they get paid.
- Mortgage by demise is when the creditor takes ownership of the property until the debt is paid in full. This type of mortgage was used a lot in the past, but not as much today. In some countries, it is even illegal.
When looking for a mortgage, you should also know a lot of other mortgage terms. Before you go to a mortgage broker's office to sign any papers, you should make sure you understand any other terms you might need to know. Hope these terms help you understand a little more about what you will be signing when you get to that point.
