Mortgage
Definition and meaning of Mortgage in real estate.
A mortgage is a legal agreement in which a borrower pledges real estate as collateral to a lender in exchange for a loan to purchase or refinance a property.
In more detail
The agreement grants the lender the legal right to seize and sell the property through foreclosure if the borrower defaults on the loan payments. In daily conversation, the term is often used to describe the loan itself, but legally it refers to the security instrument that binds the property to the debt.
The mortgage document is recorded in local public records to establish the lender's lien position against the property. Understanding the terms of a mortgage, including the interest rate, amortization schedule, and payment duration, is essential for any buyer before signing closing paperwork.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Pledging Party | The borrower, legally known as the mortgagor |
| Receiving Party | The lender, legally known as the mortgagee |
| Public Record | Recorded at the county recorder's office to protect the lender's lien |
A couple signs a mortgage agreement with a bank, securing a loan to buy their first home and allowing the bank to record a lien on the property.
Frequently asked questions
Is a mortgage the same as a home loan?
Legally, no; the home loan is the debt contract, or promissory note, while the mortgage is the security document that pledges the property as collateral for that loan.
What happens when a mortgage is paid off?
The lender issues a mortgage satisfaction or release document, which is recorded locally to clear the lien and show the owner has full title to the property.
Related terms
Sources & references
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