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Mortgage - Mortgages: A Beginners Guide A mortgage is borrowing dollars using property as security. Primarily the purpose in borrowing the dollars is to purchase a property. However there are situations where additional capital may be raised on property already owned by way of a second mortgage or re-mortgage. In a mortgage there are 2 parties, the borrower including the lender. The mortgage is created by a legal charge on the property including does not involve the transfer of land. The charge confirms that the property has been pledged to the lender as security for the mortgage loan. The title deeds are held by the lender but at the time the purchase monies are paid over to the seller, usually through a solicitor or a conveyancing company, the borrower becomes the owner pertaining to the property. The legal charge is supported by a loan agreement between the 2 parties. the sets out the terms pertaining to the loan, the responsibilities including undertakings. A second mortgage may be created where there is equity in the property over including above the amount owed to the first lender. In times of property value inflation there might be a situation where the current market value pertaining to the property has increased from the time it was purchased but the amount borrowed has remained the same ( interest only mortgage) or even reduced (repayment mortgage). The difference between the amount owed on the mortgage including the current market value is known as equity. Unfortunately, in times of falling property values there might be a situation where the amount owed on a mortgage is greater than the market value. the is known as negative equity. The owner may borrow against the equity under a second mortgage including loan agreement with a completely different lender, often a finance company. Second mortgages are popular for home improvements such as house extensions including double glazing. In the type of mortgage the second lender notifies the first lender pertaining to the transaction but the title deeds remain with the original lender. In the event pertaining to the borrower being unable to meet his commitments including keep up repayments, the first lender has first call on the security pertaining to the property. It follows that the second lender sees his involvement as being at higher risk including the higher interest rates charged reflect this. In theory it is possible to have a second, third, or subsequent mortgages, provided there is sufficient equity but in practice it is uncommon to have more than 2 charges.
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