Is it A Mortgage or Is it A Loan?
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This article is hopefully going to explain many of the things people believe about mortgages that are actually false. For one thing, although we commonly call them Mortgage home loans, this is not at all what they actually are; in fact, they aren’t loans at all, nor are they something that has been given to you by lenders.
The borrower who is also called the mortgagor and uses a mortgage to pledge real property to the lender, also called the mortgagee, as security against the debt for the rest of the value of the property. To safeguard the interests of the lender, this document provides a form of security in the event the debt cannot be repaid.
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. 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). A lien is a means by which the mortgagor can purchase a home but it is the mortgagee that retains legal ownership until the arrangement between them has been completed (the debt is paid off).
The mortgagee’s money is then protected by this knowing the property is in fact security against its own debt. Information about the lien is registered at a county courthouse, or similar, to ensure the contract is official and binding.
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. This is a strange situation where the mortgagor still owns the property even though the debt still remains to be paid.
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.
This is a legally recognized process that must take place often referred to as ‘judicial foreclosure’. This is the subject in brief and while there is a great deal more to it, perhaps this will help to clear up any ambiguities you may have previously experienced.
