In part one we dealt with the first 14 ‘need-to-know’ terms in the world of property purchase or sales from ‘amortising loan’ to ‘gearing’. It can be daunting if one doesn’t understand the processes and terminology involved in real estate transactions, so we’ve tried to explain some of the most common terms as simply as possible.

  1. Lender:

The person or organisation who provides monetary aid to another with the understanding that the amount shall be repaid according to fixed terms and guidelines.

  1. Liquid assets:

These are assets in cash or assets that are easily convertible to cash.

  1. Loan to Value (LTV):

The Loan to Value ratio is calculated by dividing the value of the loan by the value of the property. For instance if you are purchasing a property for R500 000 but you require a loan for R350 000, your LTV will be 70%.

  1. Mortgage:

This is a loan taken out for the purchase of a property, wherein the property is used as security for the loan.

  1. Mortgagee:

This is the institution or person that provides the financing for the mortgage.

  1. Mortgagor:

This is the person or institution that borrows the money from the lender or Mortgagee.

  1. Mortgage Assurance:

Mortgage Assurance is a monthly insurance premium that protects the lender and borrower by taking over mortgage payments should the borrower die.

  1. Mortgage foreclosure:

This is the process through which the lender forces the sale of the property held under the deed of the mortgage in order to recover unpaid monies that are owed by the borrower under the terms of the agreement.

  1. Principal:

This is the amount of capital borrowed from the lender.

  1. Refinance:

Borrowers may occasionally switch their loan from one product or from one lender to another in order to obtain better interest rates or terms. When this happens the initial loan is paid out and the debt is then transferred across to the new lender.

  1. Repossess:

This is defined as the reclaiming of goods or assets by the lender for failure by the borrower to make payments within the agreed terms.

  1. Title Deed:

The Title Deed is the document that shows who owns the property as well as all the property’s associated details including the erf’s size and whether there is a mortgage registered on the title.

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