Mortgages Explained

Many of the things that people believe about mortgages that are actually false.  A popular term for one is a mortgage home loan although it should never be referred to as a loan because it isn't. A mortgage is a legal document between a mortgagor or the buyer and the mortgagee or the finance supplier and consists of a way for a person to purchase a property using it as security. In fact, in reality, this isn't the debt but the security required by the lender to protect their interests for the duration of the term.

If it wasn't for the availability of mortgages, individuals and businesses would need to find the full amount for a property in order to purchase it. There are also misconceptions about how they work so below is a description of how the process works.

The mortgagor who is also referred to as the Borrower (leading to the false impression that it is a loan) and the mortgagee, who is also called the Lender (again, falsely leading you to think that a loan has been agreed). The security the mortgagee uses is called a lien which is a legal term that stays in force until all monies are repaid.


This system works so successfully because the risk of loss on the part of the mortgagee is all but eliminated as they have legal possession of the property until the debt is completely repaid. The lien (document) is normally recorded at the local courthouse in the public records section.


This act makes the purchase and the ownership of the house official and no-one can transfer this ownership until the debt is fully paid off. While the mortgagee has legal possession of the property, he does not own it or have the title to it, the legal owner is the mortgagor.


The only time the mortgagee has any rights over your property is in the event that you default on payments when he can sell it to recover the outstanding debt. This process has many names and in the United States it is referred to as foreclosure but this does need to go through the courts.

This is a legally recognized process that must take place often referred to as 'judicial foreclosure'. Obviously there is much more to the subject than this, but these are the basic foundations upon which the mortgaging system has been constructed.

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