Why We Should Call it a Mortgage and Not a Loan!
The most important thing you must realize about a mortgage is that what you believe it to be is actually wrong. They are not for instance a loan, even though the vast majority of people believe they are and often refer to them as a mortgage home loan.
The terms mortgagee (the financier) and mortgagor (buyer), are part of a legal contract (mortgage) which uses the property as security on the debt. More accurately, it is a document that protects your lender’s interest with your property itself and a legal agreement you have provided to a lender.
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. The following information will give a more rounded understanding of how the whole process operates.
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 security the mortgagee uses is called a lien which is a legal term that stays in force until all monies are repaid.
The property you are buying does in fact become collateral for the finance that has been sought to pay for it and is the protection a mortgagee needs if he is going to continue financing house purchases. Records of this are normally kept in the public records section of the county courthouse or a similar establishment.
Ownership of the property is then yours and cannot be transferred to anyone else until you have paid off the amount required to reverse the lien. So how this works is that the mortgagor (you) owns the property completely even though the mortgagee has possession of the mortgage but not 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. 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.
To ensure that everything is legal and above board, the court will place a ruling on the disposal in a process called judicial foreclosure. I hope this brief introduction has further helped your understanding of an important but often overlooked area of personal finance.
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Tags: Credit