What Are Mortgages? By: Don K. Woody

Despite increasing numbers of the population having a mortgage, it is amazing how few people actually know what they are and how they work. A mortgage home loan is not for example a standard loan, nor do rules regarding loans refer at all to it. The terms mortgagee (the financier) and mortgagor (buyer), are part of a legal contract (mortgage) which uses the property as security on the debt. However, it is easier to explain it as a legally binding document where the lender is protected from loss by using the property as security for the debt.

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. The way this process works is presented in brief detail during the rest of this article. 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.

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. This is now a recorded legal agreement and cannot be reversed until the full balance of the debt is cleared. 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.

However if the mortgagor or the owner defaults on his or her payments, the mortgagee has the right to dispose of the property to reclaim funds. 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 is a further step but it is a legal formality which needs to be taken and is often referred to 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.


If you want to delve more into the subject mortgage, you should visit http://www.remaat.com and read, The Beginner's
Mortgage Guide.

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