Participants and variant terminology

Legal systems tend to share certain concepts but vary in the terminology and jargon used.In general terms the main participants in a mortgage are:CreditorThe 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 who make loans available for the purpose of real estate purchase.A creditor is sometimes referred to as the mortgagee or lender.DebtorThe debtor[s] must meet the requirements of the mortgage conditions (and often the loan conditions) imposed by the creditor in order to avoid the creditor enacting provisions of the mortgage to recover the debt. Typically the debtors will be the individual home-owners, landlords or businesses who are purchasing their property by way of a loan.A debtor is sometimes referred to as the mortgagor, borrower, or obligor.Other participantsDue to the complicated legal exchange, or conveyance, of the property, one or both of the main participants are likely to require legal representation. The terminology varies with legal jurisdiction; see lawyer, solicitor and conveyancer.Because of the complex nature of many markets the debtor may approach a mortgage broker or financial adviser to help them source an appropriate creditor typically by finding the most competitive loan. Recently, many US consumers (particularly higher income borrowers) are choosing to work with Certified Mortgage Planners, industry experts that work closely with Certified Financial Planners to align the home finance position(s) of homeowners with their larger financial portfolio(s).The debt is sometimes referred to as the hypothecation, which may make use of the services of a hypothecary to assist in the hypothecation.In addition to borrowers, lenders, government sponsored agencies, private agencies; there is also a fifth class of participants who are the source of funds - the Life Insurers, Pension Funds, etc.Other TerminologiesLike any other legal system, the mortgage business sometimes uses confusing jargon. Below are some terms explained in brief. If a term is not explained here it may be related to the mortgage loans rather than to the legal process.Conveyance This is the legal document that transfers ownership of unregistered land.Disbursements These are all the fees of the solicitors and governments, such as stamp duty, land registry, search fees, etc.Freehold This means the ownership of a property and the land.Land Registration This is a legal document that records the ownership of a property and land. This is also known as a Title.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 stated that the lender has a legal charge over the property.Sealing Fee This is a fee made when the lender releases the legal charge over the property.Legal AspectsThere are essentially two types of legal mortgage.Mortgage by demiseIn a mortgage by demise, the creditor becomes the owner of the mortgaged property until the loan is repaid in full (known as "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 chargeIn a mortgage by legal charge, the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable 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 lienholder 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.See also: Security interests - types of security