The Mortgage fundamentals and definition

The word mortgage is security instruments, and a loan acquired to buy real property, and secured by that property itself. The borrower pledges with the property being the security for the loan, but retains the right to posses the property in question. A good example of real property is land with anything permanently attached with it, like building structures and trees of economic value, or even crude oil, and other mineral resources domiciled in it.

Basically, mortgage is in two major parts, viz: A promissory note, then the mortgage itself which guarantee the lender a security interest in the real property of value to him/her. On the other hand, the promissory note is a written contract that specifies the details of the loan and the borrower’s pledge to repay the loan when the time matures.

Many people refer to buy real estate as mortgages with loans, even when the security is not necessarily really a mortgage per say, but a deed of trust in the real sense of it. Always remember that the term mortgage is simply a written contract that specifies how the property should be used as security for the loan acquired overtime.

In most cases, a primary mortgage lender has a first lien on the property that gives the lender priority over all other lien holders, except for tax liens, which make all due taxes paid before closing, while the mortgagor(the borrowing buyer of the real estate) that usually necessitate money paid into an agreed account for taxes and insurance for protection of lender’s interest at the time under review.

Always, the title is in the name of the mortgagor, so that if the mortgagor default to agreement, the mortgagee then goes to court to foreclose on the property in question. If the court approves it, that’ll result in a foreclosure sale and the property be sold to the highest bidder, but all states have what is called ‘redemption period’ which allows the borrower to cure the default through redeeming the property within the redemption period time frame where the borrower loses the property entirely.

However, in some states, a deed of trust secures the property for the lender to hold, while the deed of trust is a special deed and not a contract that gives title to a trustee, the neutral third party with no bias to either the borrower or lender of the said property.

The lender is simply the beneficiary, should the borrower, (the trustier)defaults on the loan, the lender asks the trustee to foreclose on the property under review. It is the duty of the trustee to follow the procedure enshrined in the deed of trust and state law to foreclose on the said property.