Mortgage

The mortgage is a financial instrument that is advances a loan keeping as a collateral as security or mortgage. In old French the term mortgage was used to refer to dead-pledge. Thus mortgage is a kind of loan. Generally the mortgage is a loan obtained against real estate rather then on other valuables like a ship for instance. By arranging a mortgage individuals and business concerns can buy residential or commercial property without having to pay the value of the property then and there. This is the advantage of mortgage loans.

A mortgage is a loan against security and in this case the security is invariably landed property. In countries like UK, USA and Spain it is the normal thing to opt for a mortgage before buying a house or any other property.

A mortgage takes place between the creditor and the debtor. These are common terms used in a mortgage deed. The creditor who advances the loan has the rights to the debt incurred by the mortgage. The creditor has to be repaid. Usually the creditors in a mortgage are banks, insurance firms and other financial bodies who specialize in mortgage matters. The debtor involved in the mortgage may be an individual or a body who is/are obliged to honour the mortgage debts. If the loan in the mortgage is not repaid or delayed then there is the risk of foreclosure. The credit will take foreclosure proceedings against the offender. The mortgage property will be sold at an auction and the debt realized. Thus in a mortgage there is a risk for the debtor. The creditor is often termed the mortgagee or lender. The debtor is the mortgagor or obligor.

The agreement of mortgage is known technically as the conveyance. Both parties are represented by legal experts – termed lawyers, solicitors or conveyancers.

Since the mortgage market is often complicated and takes time the borrower in a hurry may contact the mortgage broker otherwise known as the financial adviser. The latter will connect the borrower with the appropriate lender so that the best rates can be availed of in a competitive market.

In the parlance of civil law the debt is called hypothecation because the services of a hypothecary are taken for the mortgage to be done. Generally there are two kinds of legal mortgage. In the case of mortgage by demise the creditor becomes the owner until the loan is fully repaid. This is termed redemption. This is one of the oldest form of mortgages.  In the case of mortgage by legal charge the debtor continues to be the legal owner but the creditor acquires considerable rights over the property so as to realize dues. It can be taken possession of and sold.

Mortgage deeds are registered to give protection to both parties. Since the amount involved is considerable usually the lenders conduct title searches to find out whether there are any liens attached to it or not. Often the lender of a new mortgage will clear the old dues so that the previous creditor loses all rights to the property.