Mortgage Definition
July 5 | Filed under Finance | 
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As common as mortgages are, there are a surprisingly large number of us who are under false impressions about the way they function, and what they actually are. The first thing to put straight is that it is not a loan, although they are normally referred to as a mortgage home loan. There are three terms that you need to learn that are used: the first is mortgagor (the property owner), the mortgagee (the company that takes on the security for the property) and the mortgage (the contract to pay between the two). This is just a simple way to ensure the lender is not put at risk financially by the transaction.
Mortgages have in fact changed the face of house buying because they provide the facility for the purchase without the buyer paying the full cost upfront. Although this article is brief, below are points that will help more in the understanding of how this system operates. 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 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 means that the property becomes security against itself and is the protection a mortgagee requires to fulfill his promise of funding. The lien (document) is normally recorded at the local courthouse in the public records section. So while the property is recorded as yours, there is an interest in its ownership which cannot be altered until 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 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. When this happens, the procedure that follows is called foreclosure but even at this stage it is required to go through the courts first. The reason behind this process is to ensure the legal procedures have been followed and also why it is called 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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