Essential Terminology for Purchases, Refinances, and Construction Mortgages

This glossary provides clear definitions of key terms commonly used in the context of mortgages in Guyana, whether you are purchasing a property, refinancing an existing loan, or securing a construction mortgage. Understanding these terms will help you navigate the mortgage process with greater confidence.

Mortgage Glossary: 

Amortization: The process of paying off a debt over time through regular payments. Each payment covers both interest and a portion of the principal until the loan is fully repaid.
 

Appraisal: An evaluation of a property's value, typically conducted by a certified valuer, which helps determine the maximum loan amount a lender is willing to offer.
 

Borrower: The individual or entity who applies for and receives the mortgage loan, agreeing to repay the debt according to the loan terms.
 

Closing Costs: Fees and charges associated with finalizing a mortgage transaction, such as legal fees, stamp duty, insurance, and administrative costs.
 

Collateral: Property or assets pledged by the borrower to secure the loan. In the case of mortgages, the property itself serves as collateral.

 

Construction Mortgage: A loan specifically designed to finance the building of a new property. Funds are typically released in stages as construction progresses.

Credit Report: A detailed record of a borrower's credit history, used by lenders to assess loan eligibility and determine interest rates.

Debt Service Coverage Ratio: The debt service coverage ratio (DSCR) in investment real estate is a financial metric that measures a property's ability to generate enough income to cover its debt payments. It is calculated by dividing the property's net operating income by its total debt service (loan repayments).

Debt Service Ratio: DSR is a measure used by lenders to assess whether the borrower’s income is sufficient to cover the mortgage repayments and other debts.

Deed: A legal document that proves ownership of a property.
    

Default: Default occurs when the borrower fails to make the required mortgage payments. This can lead to repossession or foreclosure by the lender, as outlined in the mortgage deed.
 

Down Payment: The initial amount paid upfront by the borrower towards the purchase price of the property, usually expressed as a percentage of the total price.
 

Equity: The difference between the current market value of the property and the outstanding balance of any mortgage or liens.
 

Fixed-Rate Mortgage: A mortgage with an interest rate that remains constant throughout the loan term, resulting in predictable monthly payments.
 

Floating/Variable Rate Mortgage: A mortgage with an interest rate that may change periodically, based on prevailing market rates.
 

Foreclosure: The legal process by which a lender takes possession of a property when the borrower fails to meet the mortgage repayment terms. 
 

Foreign Buyer: A foreign real estate buyer is an individual or entity who purchases property in a country where they do not hold citizenship or permanent residency. Typically, these buyers may acquire residential, commercial, or investment properties while residing abroad or maintaining their primary legal status in another nation. 
 

Home Equity Loan: A home equity loan is a type of loan that allows homeowners to borrow money using the equity they have built up in their property as security. The loan is typically provided as a lump sum and is repaid over a set period with fixed monthly payments. The amount that can be borrowed generally depends on the value of the home and the amount of mortgage still owed.
 

Interest Only Mortgage: An interest-only mortgage requires borrowers to pay just the interest for a set period, without reducing the principal. Once this phase ends, monthly payments rise as both principal and interest must be repaid or the mortgage may have to be repaid in full.
 

Interest Rate: The percentage charged by the lender on the outstanding loan balance, usually expressed as an annual rate.
 

Insurance (Fire & Life): Many lenders in Guyana require borrowers to have fire insurance on the property and, in some cases, life insurance for the borrower.
 

Leasehold vs. Freehold: Leasehold means the right to use the property for a set period as per the lease agreement, while freehold indicates outright ownership.
 

Loan-to-Value Ratio (LTV): The ratio of the loan amount to the appraised value of the property, used by lenders to assess risk.
 

Mortgage: A legal agreement in which a lender provides funds to a borrower for the purchase, refinancing, or construction of real estate, using the property as security.

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Mortgage Deed: This is the legal document that outlines the terms of the loan and the lender’s rights over the property in the event of default.
 

Mortgagee: The lender or financial institution providing the mortgage loan.

 

Mortgagor: The borrower who receives the loan.
 

Notary Public: A legal professional authorized to witness and authenticate documents, often involved in property transactions.
 

Pre-Approval: Pre-approval is the process whereby a lender reviews your financial situation and determines the maximum loan amount you qualify for before you begin searching for a property.

 

Principal: The original sum borrowed, excluding interest and fees. 
 

Private Mortgage: A private mortgage is a loan used to purchase property that is provided by an individual or a private organization, rather than a traditional financial institution such as a bank or building society. The terms and interest rates are typically negotiated directly between the borrower and the private lender.
 

Property Inspection: A property inspection is a formal examination of a building or premises, usually conducted to assess its condition, safety, and compliance with relevant regulations.
 

Property Taxes: Property taxes are compulsory financial charges levied by local authorities on real estate, such as land, buildings, or homes. The amount due is typically based on the assessed value of the property and is used to fund public services like schools, roads, and emergency services.
 

Refinance: The process of replacing an existing mortgage with a new one, usually to obtain better terms or access equity.

 

Rental Yield: While not strictly a mortgage term, rental yield is an important concept for property investors. It refers to the annual rental income as a percentage of the property’s value or purchase price.
 

Repayment Period: The agreed time frame over which the borrower must repay the mortgage in full.
 

Stamp Duty: A tax levied by the government on the legal recognition of certain documents, including property transfers in Guyana.
 

Survey Plan: A detailed map or drawing of the property, showing boundaries, features, and structures, often required for mortgage approval in Guyana.
 

Title Search: The process of reviewing public records to confirm the legal ownership of the property and ensure there are no claims or liens against it.
 

Transport: In Guyana, “transport” refers to the official document transferring legal ownership of immovable property from one party to another.

This glossary is intended as a guide. For specific mortgage products, terms, or legal requirements in Guyana, always consult with your lender or a qualified legal professional.