Is the Bank the Mortgagee or Mortgagor?

A mortgage is a financial agreement allowing individuals to purchase real estate by borrowing funds from a lender. Understanding the roles and responsibilities within such an agreement clarifies the legal and financial relationship.

Identifying the Mortgagee and Mortgagor

In a mortgage agreement, two primary parties are involved: the mortgagee and the mortgagor. The mortgagee is the lender, typically a bank or other financial institution, that provides the funds for the property purchase. This party receives the mortgage as security for the loan, holding a lien on the property until the debt is repaid. The term “mortgagee” ends with “ee,” which generally denotes the recipient of an action, in this case, the recipient of the mortgage as collateral.

Conversely, the mortgagor is the borrower, the individual or entity taking out the loan to buy the property. This party grants the mortgage to the lender, offering their property as collateral. The “or” suffix in “mortgagor” signifies the performer of an action, meaning the one who grants the mortgage. Therefore, the bank is the mortgagee, and the borrower is the mortgagor.

Key Obligations of the Mortgagee

The mortgagee, as the lender, undertakes several responsibilities throughout the life of the mortgage loan. A primary obligation is to disburse the loan funds to the borrower, enabling the property acquisition. The mortgagee then holds a legal claim, or lien, on the property, which serves as collateral for the loan. This lien gives the lender the right to take possession and sell the property through foreclosure if the borrower fails to meet the loan terms.

The mortgagee is also responsible for providing regular statements to the mortgagor, detailing the loan balance, payments received, and interest accrued. They must accurately apply payments to the principal and interest, and manage any associated escrow accounts for property taxes and insurance premiums. Upon the full repayment of the loan, the mortgagee has the obligation to release the lien on the property, thereby transferring clear title to the mortgagor.

Key Obligations of the Mortgagor

The mortgagor, as the borrower, has several significant obligations under the mortgage agreement. The most fundamental responsibility is to make timely principal and interest payments as outlined in the loan terms. These payments are typically made monthly and contribute to both reducing the loan balance and covering the cost of borrowing. Failure to make these payments can lead to severe consequences, including default and potential foreclosure.

Beyond monetary payments, the mortgagor is generally required to maintain the property in good condition. This helps preserve the value of the collateral backing the loan. Mortgagors are also typically responsible for paying property taxes levied by local authorities and maintaining adequate property insurance to protect against damage or loss. If an escrow account is established, these funds are often collected as part of the monthly mortgage payment and managed by the lender. Adhering to all terms and conditions specified in the comprehensive mortgage agreement, which can include clauses related to property use or transfer, is also an ongoing obligation.