While mortgages are the most common way of buying a home, it is remarkable how few people actually understand what a mortgage is. A popular term for one is a mortgage home loan although it should never be referred to as a loan because it isn't. The mortgage is a legal contract between the mortgagor who is buying the property and the mortgagee, the person supplying the finance and security against the property. In fact, in reality, this isn't the debt but the security required by the lender to protect their interests for the duration of the term.

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. To help understand how this works, some important information is discussed here. It is because the mortgagor is often referred to as the Borrower that has led to the misunderstanding that the finance for the purchase is a loan in the same way the name Lender is used to refer to the mortgagee. The document itself produces a lien on your property which is not cleared until the debt is paid.

This means that the property becomes security against itself and is the protection a mortgagee requires to fulfill his promise of funding. This lien than becomes a matter of public record when it is registered at the county courthouse or equivalent. The lien stays in force while the debt remains but the property is actually owned by the mortgagor. 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. If in the unfortunate event this happens, the process whereby the funds are reclaimed is called foreclosure. This procedure is carried out in order for it to be legally recognized and can be referred to as Judicial Foreclosure. I hope this brief introduction has further helped your understanding of an important but often overlooked area of personal finance.

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