Mortgages are more commonplace now than ever before but most people that have them really don't fully understand what they are. A common misconception is that a Mortgage is a Home Loan but this is false and people need to be educated about the fact that it is not a loan 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. This legal agreement is a way to protect the lender from loss by having the very item (house) used as security against defaulting.



Mortgages have in fact changed the face of house buying because they provide the facility for the purchase without the buyer paying the full cost 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). 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.

The mortgagee's money is then protected by this knowing the property is in fact security against its own debt. Being a legal contract, the lien will be lodged within the records at the county or city courthouse (or a similar public office). 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 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. 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.