Property Mortgages & Liens

When you buy a home you generally borrow money to ‘finance’ the purchase. Whilst the actual percentage varies, most homeowners finance raise finance using a mortgage between 80% -100% of the purchase price.

The two parties involved in this transaction are:

1. The Lender, also called the mortgagee, and
2. The Borrower, called the mortgagor.

The lender loans the borrower money to purchase their home and, in turn, the borrower gives the lender a promissory note to repay the borrowed sum of money, in accordance to an agreed set of terms [interest rate, monthly payments, term, early repayment, due on sale etc].

The lender protects their loan amount by using the house as collateral.

The mortgage becomes what is called a lien on the property. That house cannot be sold with clear title until the lien is paid off.

The promissory note is a promise that the borrower will pay the lender back in a timely fashion and as stipulated in the note.

Note: Some states use what are called Trust Deeds as opposed to a mortgage.

NEXT: Understanding Foreclosures

ALSO SEE: Subprime Lending And Foreclosures

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