A mortgage is a type of secured loan that uses real property as security. They are the most commonly accessed large loan products in the United States. The real estate gets put up as collateral to ensure that the borrower repays their loan. If the borrower does not repay their loan, then the lender can foreclose and possibly seize the real estate.
In home loans, you will hear two terms quite often, a mortgagor and a mortgagee. These are the terms used to describe the lender and borrower.
A mortgagor is the term used to describe the party that takes out a loan on a property, most often the party that holds the title on the property.
A mortgagor can get access to a variety of different loan products depending on their financial circumstances, credit rating, and the type of real estate asset that they put up as collateral.
A mortgagee is the lending party in the relationship. Most consumers think of a mortgagee as a bank or credit union that offer different loan products. However, a mortgagee can also be a private lender who puts a lien on a property as form of collateral. This is more common in loans that are in second or third position.
A mortgagee creates a legal interest in a property when they provide a loan to a mortgagor, which protects them in the possible event that the mortgagor defaults on their repayments.
When considering if they will provide a loan and when creating loan packages to offer, a mortgagee will assess the risks factors of a market and that of a mortgagor.
To summarize, a mortgagor is a borrowing party in a mortgage and a mortgagee is the lending party in a mortgage.
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