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. 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. A mortgage is a legal document between a mortgagor or the buyer and the mortgagee or the finance supplier and consists of a way for a person to purchase a property using it as security. 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.
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. Although this article is brief, below are points that will help more in the understanding of how this system operates. The problem arises because so many people refer to the buyer as the Borrower and the financier as The Lender which leads people to believe that the money has been loaned which is not the case. 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).
This is the collateral or the security for the mortgagee who has provided the security instrument. Being a legal contract, the lien will be lodged within the records at the county or city courthouse (or a similar public office). While the property is owned now by the mortgagor, the lien cannot be reversed until the amount specified in the debt is paid off. 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.
The only time the mortgagee has any rights over your property is in the event that you default on payments when he can sell it to recover the outstanding debt. 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. This is only a short introduction as the subject is much more complex but this information should make this important issue much clearer.