What is a Mortgage

written by: Isaac Baxter; article published: year 2010, month 05;

In: Root » Legal and finance » Loans and mortgages

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The term mortgage is a generic term used to describe several different combinations of legal documents that allow you to get financing to buy a home. The documents (note, bond, mortgage, deed of trust, open-end-mortgage, security deed, and riders) that you will use depend on the state in which the property is located and the type of loan you are getting.

A mortgage is a financial claim against your real estate. You give a mortgage to a lending institution, along with a bond or a note, which is a personal promise to repay. In return, the lender gives you moneycash. You do not "get a mortgage"; you do the mortgagingyou are the mortgagor. The lender takes your mortgage, holds your mortgage and is the mortgagee.

Loans secured by properties located in deed of trust states are secured by a document called a deed of trust. When you sign a deed of trust, you actually transfer ownership of the property to a trustee. The trustee holds the deed to the property in trust until such time as the loan is paid off. If a dispute arises between lender and borrower, the trustee must resolve the dispute according to state law. If the borrower stops making loan payments, the trustee must hold a foreclosure sale to pay off the lender. The procedure for a foreclosure is clearly spelled out in the deed of trust and state law, and in most states, a court hearing is not required. In most mortgage states, however, the lender must go to court, argue the case before a judge and obtain judge's approval before a foreclosure sale can be held. Lenders prefer to have loans secured by deeds of trust because foreclosing on a deed of trust is cheaper and quicker than on a mortgage. As a borrower, you can consider mortgages and deeds of trust as generally interchangeable terms.

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