Why We Should Call it a Mortgage and Not a Loan!
by: DeaneBruney |
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Despite increasing numbers of the population having a mortgage, it is amazing how few people actually know what they are and how they work. Some people have gotten into the habit of calling them mortgage home loans but that isn't right at all as they are not loans at all.
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.
A mortgage is used as a method by which individuals or businesses can purchase residential or commercial property without paying the full value upfront. To help understand how this works, some important information is discussed here.
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.
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.
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 only right that your mortgage gives to the mortgagee over your property is to sell it to recover funds in the case that you do not pay off your debt. If in the unfortunate event this happens, the process whereby the funds are reclaimed is called foreclosure.
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.
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About the Author
Did you review the agreement that you signed when you get your mortgage from your financier? Or are you now planning for a Mortgage? Browse our website to understand the difference between a mortgage and a loan and prevent foreclosure
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