Mortgage: What is it?
A mortgage is a financial term that is used in the lending industry. It means that the lender, to have security, assumes ownership of a property of the borrower until the loan is fully paid for. If the borrower fails to accomplish his financial obligations on time, or within the terms of the loan, then the lender can and will take over the property.
The term mortgage comes literally means dead pledge, and is associated with mortgage loans. A borrower must have property to borrow money through a mortgage loan to ensure that the lending firm has something to hold on to.
Commonly, mortgages are linked to real estate instead of other properties, and in other instances, only land can be mortgaged. Mortgages are used to borrow money to purchase residential or commercial properties sans paying the full price up front.
Mortgage loans are very common occurrences in many countries all over the world. In fact is is a normal situation since it is an industry that will never run out of clientele.
In general, a creditor is the person or entity that has legal claims to the debt or any other obligation secured by the mortgage. Of course this means that obligation is to repay the borrowed amount within a specific period of time. Creditors are typically banks, credit unions, or financing firms that advertise the availability of loans for real estate property buying.
The debtor, on the other hand, is the person or entity that owes the obligation, meaning this is the borrower. The debtor must meet all terms and conditions stipulated in the mortgage contract signed upon by the creditor and the debtor.
A mortgage loan contract is also typically overseen by other participants such as a lawyer, a solicitor, a mortgage broker or a mortgage adviser. This is because to the legal jargon that is present in negotiations.
There are, in essence, two types of legal mortgages present in the industry. One is mortgage by demise, and the other is mortgage by legal charge.
Mortgage by demise means the creditor (explained above) becomes the owner of the mortgaged real estate property until the debtor pays the loan in full. In this case, there needs to be conveyance, or a statement that transfers ownership to the creditor. The conveyance includes the clause that as soon as the debtor repays the amount loaned, then ownership is transferred back to him.
Mortgage by legal charge is a bit different since the debtor still legally owns the property. However, to protect the lender, the exchange is recorded in a public registry. The public registry office also does investigations on the property being mortgaged; making sure that it is not part of any other mortgage loans entered into by the debtor. In this case, the creditor still gains enough legal rights over the property mortgaged to enable it to take possession or sell the property in the occasion that the debtor fails to comply with the terms of the loan agreed upon.
Tags: Mortgage