The Basics of a Mortgage

by Investing School on May 24, 2010

A mortgage is a lender’s security for a debt. It is also the transfer of interest in a property to a lender. The interest is transferred from the owner to the mortgage lender with the condition that the interest will be returned once the terms of the mortgage have been met.

The word’s origins are French which means “dead pledge”. It meant that once the pledge ended or was “dead” then the obligation had been met.

In most cases, mortgages are loans that are secured on real estate as opposed to other types of assets. This is the most common way that businesses and ordinary people can buy real estate without having to put forth the full value immediately. It is usually the largest financial obligation most individuals will ever make.

There are different terms related to mortgages. First, there is the mortgage lender. The mortgage lender is an investor and has the funds that are secured by a mortgage. The mortgagor (also known as the borrower) agrees to pay back the loan in installments. If the mortgagor fails to do so then the lender has the right to sell that secured property to pay off the loan.

The borrower is the mortgagor or the person that borrows the money from the lender. They have an obligation, under the terms of the mortgage, to pay back the lender for the opportunity to purchase the asset. The borrower must usually meet stringent criteria in order to qualify for and meet the conditions of the mortgage.

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