What Is A Mortgage?
There are many misconceptions about mortgages which I hope this article will put right. The worst thing to call one is a mortgage home loan and while this expression is in common usage, it is totally incorrect. The mortgagor is the person who owes money to the mortgagee (the person who finances the deal) using a legal contract called a mortgage. Actually, it is in fact a legal document that is designed to ensure the lenders financial interests are secure.
Without mortgages being available, people and many businesses would not be able to afford the full asking price of a property if it was required they pay this amount upfront. Misunderstandings on how the system works also create problems but the main points are dealt with during the rest of this article. Unfortunately it is our own common use of word like Borrower and Lender that has mislead people into thinking a mortgage is a loan when they should be referred to as Mortgagor and Mortgagee respectively. The property has a lien, which is the legal ownership of the property by the mortgagee until the agreement between the two parties has been fulfilled.
This is the collateral or the security for the mortgagee who has provided the security instrument. 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 only right that your mortgage gives to the mortgagee over your property is to sell it to recover funds in the case that you do not pay off your debt. When this happens, the procedure that follows is called foreclosure but even at this stage it is required to go through the courts first. This procedure is carried out in order for it to be legally recognized and can be referred to as Judicial Foreclosure. For the sake of clarity this is only a brief description of a much more complex subject but it should have helped explain the basic subject.