If you were to be asked to describe and give a definition for the word mortgage, would you be able to, because it is surprising how few people know what they really are. For one thing, although we commonly call them Mortgage home loans, this is not at all what they actually are; in fact, they aren’t loans at all, nor are they something that has been given to you by lenders. The property becomes a security (and legally binding contract), or mortgage, for the buyer, or mortgagor with the finance supplied by the mortgagee. The document is just a simple way to safeguard the lenders interests.

The mortgage has made it possible for people and companies to buy properties with only a small percentage of the purchase price as a deposit. Although this article is brief, below are points that will help more in the understanding of how this system operates. It is because the mortgagor is often referred to as the Borrower that has led to the misunderstanding that the finance for the purchase is a loan in the same way the name Lender is used to refer to the mortgagee. A security measure designed for purchasing properties, called a lien, is enforced until the mortgage is cleared at the end of the term.

The mortgagee’s money is then protected by this knowing the property is in fact security against its own debt. Being a legal contract, the lien will be lodged within the records at the county or city courthouse (or a similar public office). While the property is owned now by the mortgagor, the lien cannot be reversed until the amount specified in the debt is paid off. What this means is that even though the mortgagee has possession of the mortgage he is not the owner of the property nor does he have the title.

The mortgage is a surety for the benefit of the mortgagee, so should the debt remain unpaid then the amount owed can be reclaimed by the sale of the property. In the unfortunate event that requires the property to be sold or Foreclosed, then the case will need to be presented to the courts for approval. This procedure is carried out in order for it to be legally recognized and can be referred to as Judicial Foreclosure. This is the subject in brief and while there is a great deal more to it, perhaps this will help to clear up any ambiguities you may have previously experienced.

SOURCES: Mortgages Information

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