What is a Mortgage? 2


A mortgage is a legal document offering the bank your house as security for a loan.  The bank registers the mortgage as an interest on the title of your house.  This interest gives the bank the ability to sell the house if you default on your loan repayments.

You as the owner of the house are the mortgagor (offerer), and the bank is the mortgagee (receiver).

When a property goes to mortgagee sale it is because the mortgagee (bank) is in possession.

It might help to remember these definitions as being similar to lessor (landlord, offers lease) and lessee (tenant, receives lease); or employer (offers job) and employee (receives job).

Most people incorrectly refer to their home loan as a mortgage.  The two are linked because you have to provide the bank with the mortgage to get the home loan, but they are not the same thing.

Now you should understand that you’re not “shopping for a mortgage”, or “paying off a mortgage”.  In fact it is quite possible that you could pay off your home loan and still have a mortgage!

If you are using the equity in your own home as a deposit on an investment property, the mortgage over your home will not be released when you pay off your home loan.  The bank will want to keep this in place until your investment property is valuable enough to provide security for the investment loan.

I have heard people attempt to break the word mortgage down into two parts and claim that ‘mort’ means death and ‘gage’ means pledge, so the interpretation could be taken to mean “pledge until death“.

Here is an interesting article that may shed more light on the origins of the word.

Now when someone says that they can save you money on your mortgage, you can question whether they know what they are talking about.  Perhaps they are providing a legal service that draws up the mortgage contract!

 


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