There are many misconceptions about mortgages which I hope this article will put right. 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.
If you were to be asked to describe and give a definition for the word mortgage, would you be able to, because it is surprising how few people know what they really are. 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 mortgagor is the person who owes money to the mortgagee (the person who finances the deal) using a legal contract called a mortgage. What this means is this document is a way for the property to be used to safeguard any potential problems with payment until the house is finally paid for.
A mortgage is used as a method by which individuals or businesses can purchase residential or commercial property without paying the full value upfront. The way this process works is presented in brief detail during the rest of this article. 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 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 is the collateral or the security for the mortgagee who has provided the security instrument. This lien is recorded within public records likely to be found at a county courthouse or similar establishment. 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. This is a strange situation where the mortgagor still owns the property even though the debt still remains to be paid.
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. When this happens, the procedure that follows is called foreclosure but even at this stage it is required to go through the courts first. This is a further step but it is a legal formality which needs to be taken and is often referred to judicial foreclosure. This is only a short introduction as the subject is much more complex but this information should make this important issue much clearer.
