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.
So how this works is that the mortgagor (you) owns the property completely even though the mortgagee has possession of the mortgage but not the title.
This means the only occasion that can arise whereby the mortgagee can legally sell your home is if you stop making payments and it needs to be sold to repay the finance used to purchase it. This is the dreaded process referred to as foreclosure but if the property is used as security, then the foreclosure must go through the court system.
This is a legally recognized process that must take place often referred to as 'judicial foreclosure'. Obviously there is much more to the subject than this, but these are the basic foundations upon which the mortgaging system has been constructed.
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