Mortgage

Mortgage can be defined as the method of utilizing a property, which can be a real estate or a personal one, as a security to acquire a loan for purchasing the same asset. Mortgage, derived from 'mort' and 'gage', is a term that has its origin from French Law. In French, the term 'mort' means dead and 'gage' signifies pledge. The word was utilized to refer a property that is useless or dead for the borrowers if they were not able to payoff the debts. There are jurisdictions around the globe that allows only real estate properties or lands to be mortgaged. However, many countries permit funding to both commercial and residential properties by putting them up for mortgage.

Parties Involved in a mortgage

Parties primarily involved in incorporating a mortgage are the borrower (debtor) and the lender (creditor). Lenders are also referred as mortgage or creditors. Lender is the party that provides the loan and the property is mortgaged to them. Borrowers are also referred to as mortgagor or debtors. Borrower is the party that acquires the loan and puts up their property for mortgage to the lender. The stakes and legal issues are so high and complicated that both the parties require having a solicitor to represent them for the deal.

Features of mortgage

Mortgage allows the lender to have a right for the title or a lien of the borrower's property. The ownership of the property is not absolutely transferred from the borrower to the lender through a mortgage. 'Mortgage Deed' is the instrument that creates a mortgage. Though the mortgage is a secured loan and the lenders possesses lien on mortgaged property, they can not directly secure a complete ownership in case of a default from the debtor. Lenders are required to move to the court of law for recovering their funds. A property can only be put on sale if a proper legal process is followed declaring that the debts are due and a default has been committed by the borrower.

Borrowers and lenders

Borrowers require the mortgage loans for purchasing a high-valued property. Borrowers expect to utilize these assets in their business or other sources of income for repaying the loan and the appropriate interest accumulated to the lender. Lenders have many funds available to them. They look towards investment that can earn maximum return without any insecurity. Mortgage loans are the solution for them as it gives them desired return and the mortgaged property offers them the security that they require. Mortgage is incorporated through legal processes, allowing the borrowers to have the ownership and the lenders to have rights to take control of the property in case of a default and sell the same, i.e. foreclosure.