What Is a Mortgagor? Definition and Key Responsibilities
Discover the essential role of a mortgagor in property finance. Unpack their definition, primary duties, and how they relate to a mortgage loan.
Understanding Mortgages
A mortgage represents a financial agreement where a borrower receives a sum of money from a lender to purchase or refinance real estate. This arrangement involves the borrower pledging the acquired property as security for the loan. The mortgage itself is a legal instrument that creates a lien against the property, providing the lender with a claim to the asset if the borrower fails to meet their repayment obligations. This financial tool enables individuals to acquire property without paying the full price upfront.
Understanding the Mortgagor
The mortgagor is the individual or entity that borrows money in a mortgage transaction. They are the party who pledges their property, typically a home, as collateral to secure the loan from a financial institution. This means the mortgagor is the homeowner, responsible for making regular payments of principal and interest to the lender over an agreed-upon period.
The mortgagor signs a promissory note, which is a legal promise to repay the borrowed funds according to the terms of the mortgage agreement. As the borrower, the mortgagor holds the title to the property, but the lender holds a lien against it until the loan is fully repaid. This arrangement allows the mortgagor to occupy and use the property while gradually building equity through their payments. Should the mortgagor fail to make timely payments, they risk defaulting on the loan, which can lead to the lender initiating foreclosure proceedings to recover the outstanding debt.
Distinguishing Between Mortgagor and Mortgagee
It is common to confuse the terms mortgagor and mortgagee, but their roles in a mortgage agreement are distinct. The mortgagor is always the borrower, the individual who receives the funds and pledges their property as collateral. This party is obligated to repay the loan according to the terms outlined in the mortgage contract and promissory note.
In contrast, the mortgagee is the lender, which is typically a bank, credit union, or another financial institution. The mortgagee provides the funds to the mortgagor and holds a legal claim, or lien, against the property until the loan is satisfied. The mortgagee’s primary role is to provide the capital and collect payments, including principal and interest, from the mortgagor.