Mortgage Phrases Discussed In Plain English

Mortgage Phrases Discussed In Plain English

Buying a property is not only an exhilarating purchase, but it is also a huge responsibility. Initially you have to make sure that you are eligble for home financing, then you need to hold thumbs that the mortgage application goes well and once all the paperwork is finally done and dusted, you have to start with monthly repayments. which generally continues for between 20 and 30 years!

Looking for your first home loan or mortgage loan as it is also referred to, can be quite a scary process. You will be inundated with unfamiliar stipulations and phrases which you might not be able to make sense of. This all can add a lot of stress to an already traumatic process; therefore it's better to at least have a basic familiarity with some of the most common home loan terms:

A home loan can also be called a mortgage loan, a house loan or a bond. No matter what you choose to call it, you must understand that your property is seen as security for the borrowed funds. The lending company has the full right to take the house back should you not be able to honour your repayments.

One of the first documents that a mortgage company would ask to see is an agreement of sale. This is also known as a deed of sale and is a record stating that you, the prospective buyer, is normally considering buying a specific property from the person known as the seller.

Many mortgage loans cannot be obtained without bond protection. Bond protection is comparable to life insurance coverage and will cover the outstanding amount on the bond in the event that the borrower passes away or becomes disabled.

A few people prefer to borrow money in order to be able to build their own houses. In this scenario a building loan would be required. Very few finance companies offer building loans as it is an enormous risk to the loan company. In the event that you aren't able to make your payments, there is not much that they can do with a partly completed house and they run the risk of losing a small fortune.

If the mortgage company uses the term cession, they are merely referring of the course of action where the rights of ownership is shifted from the seller of the house to you, the purchaser. Once this has been completed you are officially the new owner of the home or property.

To be able to protect a buyer, all sales contracts need to include a cooling off period. This is a couple of days where the prospective buyer can cancel or stop his offer to purchase and both the seller and the mortgage loan company should honour this final decision. A cooling off period is normally around 5 days, but can differ from lender to lender.

I hope the above terminology can make acquiring a mortgage loan a little less intimidating! Buying a house is an exhilarating process, don't let anything spoil your fun!

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