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Glossary A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Acceleration The right of the mortgagee (lender) to
demand the immediate repayment of the mortgage loan balance upon the default
of the mortgagor (borrower).
Agents Commission Payable by
the Seller. It is also used as part of the negotiating tool(much to the
dislike of the agent of course) should a buyer come in with a lower offer for
a particular property. Affordability AnalysisAn analysis of a buyers ability to
afford the purchase of a home. Reviews income, liabilities, and available
funds, and considers the type of mortgage you plan to use, the area where you
want to purchase a home, and the closing costs that are likely. Amortization Means loan payment by equal periodic
payment calculated to pay off the debt at the end of a fixed period,
including accrued interest on the outstanding balance. Amortization Term The length of time required to amortize
the mortgage loan expressed as a number of months. For example, 240 months is
the amortization term for a 20-year fixed-rate mortgage. Annual percentage rate (A.P.R.) APR is a measurement of the full cost
of a loan including interest and loan fees expressed as a yearly percentage
rate. Because all lenders apply the same rules in calculating the annual
percentage rate, it provides consumers with a good basis for comparing the
cost of loans. Appraisal An estimate of the value of property,
made by a qualified professional called an "appraiser". Appraised Value An opinion of a property's fair market
value, based on an appraiser's knowledge, experience, and analysis of the
property. Assets and Liabilities What you own and what
you owe. Assignment The transfer of a mortgage from one
person to another. Banks' Criteria
Firstly and most importantly, different banks have
different criteria. Some Private
banks like Investec, will only look at an applicant if he/she is earning over
a certain amount per month(e.g. R20 000.) The normal
procedure would be to send an application to your own bank. This does not
always work out in favour of the client, as there are many cases where a
client gets better interest rates with other banks rather than their own
bank. Therefore the application should be sent to more than one bank in order
to guarantee the best rate possible. The more
accurate and correct the information given to the banks first time around,
the better the turnaround time and the less likely for further queries and
questions due to non-disclosure. Biweekly Payment Mortgage A plan to reduce the debt every two
weeks (instead of the standard monthly payment schedule). The 26 (or possibly
27) biweekly payments are each equal to one-half of the monthly payment
required if the loan were a standard 30-year fixed-rate mortgage. The result
for the borrower is a substantial savings in interest. Bond Registration Feespayable by
the borrower to the attorneys appointed by the bank to attend to the
registration of the bond at the Deeds Office. The fee is on a sliding scale.Also
remember to allow for the Valuation fee charged by the bank when they go to
the property to assess its value as the final part of the bond approval
process. Borrower One who applies for and receives a loan
in the form of a mortgage with the intention of repaying the loan in full. Bridging Finance A second loan that is collateralized by
the borrower's present home allowing the proceeds to be used to close on a
new house before the present home is sold. Broker An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services. Cash Flow The amount of cash derived over a
certain period of time from an income-producing property. The cash flow
should be large enough to pay the expenses of the income producing property
(mortgage payment, maintenance, utilities, etc.). Caps (interest) Consumer safeguards which limit the
amount the interest rate on an adjustable rate mortgage which may change per
year and/or the life of the loan. Caps (payment) Consumer safeguards which limit the
amount monthly payments on an adjustable rate mortgage may change. Closing The meeting between the buyer, seller
and lender or their agents where the property and funds legally change hands,
also called settlement. Closing costs usually include an origination fee,
appraisal fee, title search and insurance, survey, taxes, deed recording fee,
credit report charge and other costs assessed at settlement. Closing Costs These are expenses - over and above the
price of the property- that are incurred by buyers and sellers when
transferring ownership of a property. Closing costs normally include an
origination fee, property taxes, charges for title insurance and escrow
costs, valuation fees, etc. Building loan Loan taken out to build your own
house.The NHBRC fee attached to this must be noted. This is 1.5% of the total
value of the land and the building. This is an insurance on the building in
case something goes wrong. Contract sale or deed: A contract between purchaser and a
seller of real estate to convey title after certain conditions have been met. Conveyancing AttorneyAn attorney
who is permitted to handle the legal process associated with transfer of
ownership of fixed property in South Africa and the registration of any
bonds. The Seller appoints the transferring attorney and the lending bank
appoints the bond registration attorney. Remember that several other
attorneys may be involved, including one to cancel existing bonds and one to
attend to the transfer in a situation where the Purchaser is selling in order
to raise part of the purchase price of his new house. If you can
arrange to use the same conveyancing attorney for all of the above, then you
could get a discount of up to 30% on their costs. If you use
the same conveyancing attorney it would also save you having to drive to all
the other possible attorneys involved.. Make sure the
conveyancer you choose is on the banks panel. Credit Report A report documenting the credit history
and current status of a borrower's credit standing. Debt-to-Income Ratio The ratio, expressed as a percentage,
which results when a borrower's monthly payment obligation on long-term debts
is divided by his or her gross monthly income. See housing expenses-to-income
ratio. Default Failure to meet legal obligations in a
contract, specifically, failure to make the monthly payments on a mortgage. Deferred interest When a mortgage is written with a
monthly payment that is less than required to satisfy the note rate, the
unpaid interest is deferred by adding it to the loan balance. See
negative amortization. Delinquency Failure to make payments on time. This
can lead to foreclosure. Down Payment Money paid to make up the difference
between the purchase price and the mortgage amount. Due-on-Sale-Clause A provision in a mortgage or deed of
trust that allows the lender to demand immediate payment of the balance of
the mortgage if the mortgage holder sells the home. Equity The difference between the fair market
value and current indebtedness, also referred to as the owner's interest. The
value an owner has in real estate over and above the obligation against the
property. First Mortgage The primary lien against a property. Fixed Installment The monthly payment due on a mortgage
loan including payment of both principal and interest. Fixed Rate Mortgage The mortgage interest rate will remain
the same on these mortgages for a specified term of the mortgage for the
original borrower. Foreclosure A legal process by which the lender or
the seller forces a sale of a mortgaged property because the borrower has not
met the terms of the mortgage. Also known as a repossession of property. Guaranty A promise by one party to pay a debt or
perform an obligation contracted by another if the original party fails to
pay or perform according to a contract. Guarantee Mortgage (surety) A mortgage that is guaranteed by a
third party. Housing Expenses-to-Income Ratio The ratio, expressed as a percentage,
which results when a borrower's housing expenses are divided by his/her gross
monthly income. See debt-to-income ratio. Installment The regular periodic payment that a
borrower agrees to make to a lender. Interest The fee charged for borrowing money. Interest Accrual Rate The percentage rate at which interest
accrues on the mortgage. In most cases, it is also the rate used to calculate
the monthly payments. Investor A money source for a lender. Liabilities A person's financial obligations.
Liabilities include long-term and short-term debt. Lien A claim upon a piece of property for
the payment or satisfaction of a debt or obligation. Loan A sum of borrowed money (principal)
that is generally repaid with interest. Loan-to-Value Ratio The relationship between the amount of
the mortgage loan and the appraised value of the property expressed as a
percentage. Market Value The highest price that a buyer would
pay and the lowest price a seller would accept on a property. Market value
may be different from the price a property could actually be sold for at a
given time. Maturity The date on which the principal balance
of a loan becomes due and payable. Mortgage A legal document that pledges a
property to the lender as security for payment of a debt. Mortgage Broker(originator) An individual or company that charges a
service fee to bring borrowers and lenders together for the purpose of loan
origination. Mortgagee The lender. Mortgage Life Insurance A type of term life insurance In the
event that the borrower dies while the policy is in force, the debt is
automatically paid by insurance proceeds. Mortgagor The borrower or homeowner. Net Income
The borrower's
gross income minus income tax(and other deductions like fringe benefits,etc). Occupational InterestIf you are
living in a house for any period while that house is registered in the name
of another party, rent must be paid just like a tenant for the right to
occupy someone else's property. The way to avoid incurring liability for
occupational rent is to insist though a clause in the Offer to Purchase on
occupation being given to your Purchaser on the day transfer goes through.The
safest timing would be 6 to 8 weeks from signing of the deed of sale. Offer to PurchaseEstate agents
have pre-printed documents containing most of the clauses required to cater
fairly to both Purchaser and Seller. At the point when you are ready to make
an offer, the agent is bound by a code of conduct to work for you by taking
you through each clause explaining the meaning and implications. Do not allow
yourself to be rushed into signing until you are comfortable with all the
conditions, especially the Suspensive ones, of which more below. Remember,
buying a house, especially for the first time, is probably the biggest
investment decision you will make Power of Attorney A legal document authorizing one person
to act on behalf of another. Pre-Approval The process of determining how much
money you will be eligible to borrow before you apply for a loan. Prepaid Expenses Necessary to create an escrow account
or to adjust the seller's existing escrow account. Can include rates and
taxes. Prepayment A privilege in a mortgage permitting
the borrower to make payments in advance of their due date. Prepayment Penalty Money charged for an early repayment of
debt. Principal The amount borrowed or remaining
unpaid. The part of the monthly payment that reduces the remaining balance of
a mortgage. Principal Balance The outstanding balance of principal on
a mortgage not including interest or any other charges. Principal, Interest, Taxes, and Insurance (PITI) The four components of a monthly
mortgage payment. Principal refers to the part of the monthly payment that
reduces the remaining balance of the mortgage. Interest is the fee charged
for borrowing money. Taxes and insurance refer to the monthly cost of
property taxes and homeowners insurance, whether these amounts that are paid
into an escrow account each month or not. Qualifying Ratios Calculations used to determine if a
borrower can qualify for a mortgage. They consist of two separate
calculations: a housing expense as a percent of income ratio and total debt
obligations as a percent of income ratio. RatesThese are
taxes levied on all property owners by the municipality. Rates are included
in the levy if you buy Sectional Title. Most authorities have an annual
assessment which, by arrangement, you can pay monthly. As part of the change
of ownership process, what is called a " Rates Clearance"
certificate must be obtained from the municipality. This is done as a service
on behalf of the new owner by the conveyancing attorney. The rates cut
off date is the end of June, therefore you will need to pay the rates in
advance for the following year if you are past this date. e.g. From
August to next June. Real Estate Agent A person licensed to negotiate and
transact the sale of real estate on behalf of the property owner. Refinance Obtaining a new mortgage loan on a
property already owned. Often to replace existing loans on the property. Second Mortgage A mortgage made subsequent to another
mortgage and subordinate to the first one. Security The property that will be pledged as
collateral for a loan. Standard Payment Calculation The method used to determine the
monthly payment required to repay the remaining balance of a mortgage in
substantially equal installments over the remaining term of the mortgage at
the current interest rate. Survey A measurement of land, prepared by a
registered land surveyor, showing the location of the land with reference to
known points, its dimensions, and the location and dimensions of any
buildings. Suspensive ConditionsThese are
conditions written into the Offer to Purchase by buyer or seller which must
be fulfilled for the Offer to become a Deed of Sale, that is, unconditional
and legally binding on all parties. Title A document that gives evidence of an
individual's ownership of property. Title Search An examination of municipal records to
determine the legal ownership of property. Usually is performed by a title
company. Total Expense Ratio Total obligations as a percentage of
gross monthly income including monthly housing expenses plus other monthly
debts. Underwriting The decision whether to make a loan to
a potential home buyer based on credit, employment, assets, and other factors
and the matching of this risk to an appropriate rate and term or loan amount. Usury Interest charged in excess of the legal
rate established by law. Verification of Employment (VOE) A document signed by the borrower's
employer verifying his/her position and salary. VoetstootsThe property
is sold "as is". If there was
non-disclosure of certain defects, then the seller would have to answer to
these defects. These are termed latent defects(known to the seller before
selling and apparent to the buyer after buying). |
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