Many a borrower has gotten hung up on mortgage lingo and financial jargon. When brokers and lenders take the time to explain one can only be more confused.
Adding to the confusion is the fact that one mortgage is not like the other. Exactly what do home mortgages purport to be? Is a mortgage a loan? Is it a contract? Is it the deed? What parties are involved and how is actual property ownership defined? As home loan borrower, are you the actual owner of the property being financed? We need only look closer at the definitions for each party involved in the process.
Mortgages by definition are devices used to create a lien on real estate properties by contract. Such device is used as a method by which individuals or businesses can buy residential or commercial property without paying the full value upfront.
Mortgagor Defined
The mortgagor (borrower) is the borrower of money for a mortgage. The party of a mortgage agreement who receives financing for real estate property. The person who gives a mortgage in return for money to be repaid. Sometimes spelled mortgager.
Mortgagee Defined
The mortgagee (Lender) is the party lending the money and receiving the mortgage. The creditor or lender in a mortgage agreement.
Therefore the borrower uses a mortgage to pledge real property to the lender (also called the mortgagee) as security against the debt for the rest of the value of the property.
Defining Other Types of Mortgages Defined
Conventional Mortgage: With a conventional mortgage, the lender obtains a lien or defeasible legal title to the property in return for the payment of the amount of money lent.
FHA Mortgage: An FHA mortgage is a conventional mortgage which is insured in whole or in part by the Federal Housing Authority.
Purchase Money Mortgage: A purchase money mortgage is one given to secure a loan used to buy the property.
Senior Mortgage
The first mortgage. A first (senior) mortgage on the property has priority over any second or subsequent (junior) mortgages on the property; the senior lender has a more secure interest in the event of a default since the senior obligations are paid first in the event of foreclosure and sale.
Adjustable Rate Mortgages: An adjustable rate mortgage (also called "ARM") offers a fixed initial interest rate and a fixed initial monthly payment. After the initial period is over, the rate and term of the mortgage can be modified at predetermined times under the agreement to reflect the current market mortgage rates.
For more help defining mortgage and loan terms I recommend the following sites.
Google.com has implemented a number of dictionaries in its search results. Simply begin each search with the term "define" followed by the financial keyword you are seeking a definition to. Example: "Define Mortgages".
The Blogger mortgage glossary dictionary at http://mortgages-glossary.blogspot.com has basic mortgage terms defined. Take time to do research on financial terms your not familiar with. Notice updated or clarified definitions by using more than one online dictionary or mortgage glossary. When trying to understand the mortgage process remember that it's all in the word.
Mark Askew is the founder of the Mortgage Loan Search Financial Network. A network of mortgage related informational resources and portals centralized at http://www.bcpl.net/~ibcnet The network features highly recommended, helpful, financial decision making tools, mortgage guides and refinancing tips to save time and money when contemplating home mortgage financing or refinancing.