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The Function Of A Mortgage
If you were to be asked to describe and give a definition for the word mortgage, would you be able to, because it is surprising how few people know what they really are. Some people have gotten into the habit of calling them mortgage home loans but that isn't right at all as they are not loans at all. The mortgage is basically a way of securing a debt to which the property is the security with the mortgagor as the person who will owe money to the mortgagor. More accurately, it is a document that protects your lender's interest with your property itself and a legal agreement you have provided to a lender.
If it wasn't for the availability of mortgages, individuals and businesses would need to find the full amount for a property in order to purchase it. There are also misconceptions about how they work so below is a description of how the process works.
Unfortunately it is our own common use of word like Borrower and Lender that has mislead people into thinking a mortgage is a loan when they should be referred to as Mortgagor and Mortgagee respectively. The security is in fact a lien which means the mortgagee has legal possession of your property until the debt is repaid.
This system works so successfully because the risk of loss on the part of the mortgagee is all but eliminated as they have legal possession of the property until the debt is completely repaid. The lien (document) is normally recorded at the local courthouse in the public records section.
While the property is owned now by the mortgagor, the lien cannot be reversed until the amount specified in the debt is paid off. While the mortgagee has legal possession of the property, he does not own it or have the title to it, the legal owner is the mortgagor.
The only time the mortgagee has any rights over your property is in the event that you default on payments when he can sell it to recover the outstanding debt. This process has many names and in the United States it is referred to as foreclosure but this does need to go through the courts.
This is a legally recognized process that must take place often referred to as 'judicial foreclosure'. This is the subject in brief and while there is a great deal more to it, perhaps this will help to clear up any ambiguities you may have previously experienced.
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