An ‘agreement in principle’ is an agreement from a mortgage lender that in principle they will lend the buyer a specified sum for property purchase, on the condition that the property is adequate security for the mortgage and provided that the buyer is able to verify the income and satisfy any other conditions.  The lender normally collects basic information from the prospective borrower and runs a credit check / credit reference check before providing an agreement in principle to the buyer.

The buyer can get a ‘decision in principle’ (DIP) from a lender even before choosing the final property. The ‘Decision in Principle’ shows whether the lender is prepared to lend and how much they are willing to lend. The decision is based on information the prospective borrower gives regarding:

• The income

• The employment status

• The  type of property the borrower wants to buy

An agreement in principle is not binding on either party. Even if the buyer gets an agreement in principle, he / she is not under any obligation to apply to that lender or take out a mortgage with them.

Creditor:  A creditor is a person or organisation which extends credit to others. Typically, creditors are banks, insurers or other financial institutions who provide loans for the purpose of real estate purchase.

The creditor has legal rights to the debt, secured by the mortgage and provides a loan to the debtor for purchase of the property.

A creditor is sometimes referred to as the mortgagee or lender.

Debtor:  A debtor is an individual or company that owes debt to another individual or company (the creditor), as a result of borrowing.

Typically the debtors will be the individual home-owners, landlords or businesses who are purchasing their property by availing a loan.

The debtor or debtors 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.

A debtor is sometimes referred to as the mortgagor, borrower, or obligor.

If your bank account regularly goes over your arranged overdraft limit, you will have to pay extra interest and charges. Your bank could also cancel your overdraft limit or refuse to renew it when your agreement runs out. If you lose control of your bank account, it can become very difficult to manage your business and household finances.

Unpaid cheques, direct debits and standing orders will make your debt problem worse and any money paid into your bank account may be taken up by interest and bank charges instead of covering payments you need to make. You may find it easier to change your overdraft into a loan. Remember, you may lose your overdraft as the bank will often make it a condition of the loan that you keep your current account in credit. You will also be committed to making payments towards the loan each month. Make sure you can afford this and make sure the interest rate on your new loan is no higher than the overdraft rate was.

Why are you interested in these loans? What would you do with the money you would get from one? Are the needs you intend to meet really worth the high cost of these loans? If you want to take that dream vacation, a reverse mortgage is a very expensive way to pay for it. Investing the money from these loans is an especially bad idea because the loan is highly likely to cost more than you could safely earn. If anyone is trying to sell you something and recommending you use a reverse mortgage to pay for it, that’s generally a good sign that you don’t need it and shouldn’t be buying it. Be especially wary if you don’t fully understand what they are selling or aren’t certain that you need it.

Mortgage foreclosure frauds: Thieves may contact homeowners at risk of losing their home to foreclosure and propose to help by “paying your mortgage” while you temporarily “rent” your home from them. They then trick you into signing documents that transfer the ownership of the property to the crooks. In other scams, phony companies claiming to be housing counsellors offer to negotiate a new loan or perform other services for very high upfront fees and do little or nothing in return.

Credit card fraud: Identity thieves steal personal information and apply for new credit cards or make counterfeit cards. Under federal law, if a thief uses your credit card or card number the most you are liable for is $50. Even so, ID theft in general can be costly to fix, and it can take months to repair the damage. Notify your card issuer about any problems as soon as possible to help limit your losses. How can you avoid credit-related fraud or deception in general? “Deal with financial institutions or other companies you know or that you have independently verified as being legitimate,” explained Randall Howe, a fraud specialist at the FDIC. When

in doubt, he said, you may contact the FDIC for guidance (see the back page) or call your state or county’s consumer protection office.

As for preventing credit card fraud, safeguard your personal and financial information and monitor your credit card statements and credit reports for signs that a thief has stolen your identity.

Reverse mortgages generally must be “first” mortgages; that is, they must be the primary debt against your home. So if you now owe any money on your property, you generally must do one of two things:

• Pay off the old debt before you get a reverse mortgage; or

• Pay off the old debt with the money you get from a reverse mortgage.

Most reverse mortgage borrowers pay off any prior debt with an initial lump sum advance from their reverse mortgage. In some cases, you may not have to pay off other debt against your home. This can occur if the prior lender agrees to be repaid after the reverse mortgage is repaid. Generally, the only lenders willing to consider “subordinating” their loans in this way are state or local government agencies. The debt you owe on a reverse mortgage equals all  the loan advances you receive (including any used to finance loan costs or to pay off prior debt), plus all the interest that is added to your loan balance. If that amount is less than your home is worth when you pay back the loan, then you (or your estate) keep whatever amount is left over.

A “reverse” mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay a loan each month. The cash you get from a reverse mortgage can be paid to you as:

• Single lump sum of cash;

• Regular monthly cash advance;

• “credit line” account that lets you decide when and how much of your available cash is paid to you; or

• Combination of these payment methods.

No matter how this loan is paid out to you, you typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.