A loan used to buy real estate. A mortgage is secured by the property it is used to purchase. One must make monthly payments on a mortgage, and there is a set term before full payment is due, often 15, 20, or 30 years. Some mortgages have fixed interest rates. while others have variable interest rates. If one defaults on a mortgage, the bank making it may take possession of the real estate and sell it to recover its investment. Some banks, notably savings and loans. specialize in making mortgage loans. See also: Mortgage-backed security .
A mortgage, or more precisely a mortgage loan, is a long-term loan used to finance the purchase of real estate.
As the borrower, or mortgager, you repay the lender, or mortgagee, the loan principal plus interest, gradually building your equity in the property.
The interest may be calculated at either a fixed or variable rate, and the term of the loan is typically between 10 and 30 years.
While the mortgage is in force, you have the use of the property, but not the title to it. When the loan is repaid in full, the property is yours. But if you default, or fail to repay the loan, the mortgagee may exercise its lien on the property and take possession of it.
What Does Mortgage Mean?
A debt instrument that is collateralized by real estate property; the borrower (mortgage owner) is obliged to pay back both the principal and the interest with periodic payments over the course of the loan. Mortgages are used by individuals and businesses to make large purchases of real estate without paying the entire value of the purchase up front. Mortgages also are known as liens against property and claims on property.
Investopedia explains Mortgage
In a residential mortgage, a home buyer pledges his or her house to the bank. The bank has a claim on the house if the home buyer defaults on paying the mortgage. In the case of a foreclosure, the bank may evict the home's tenants and sell the house, using the income from the sale to pay off the mortgage debt.
A written document that provides a lender with rights in real property as collateral for a loan.The loan itself is evidenced by a promissory note, which is a written promise to repay money on certain
terms and conditions. In common language, people refer to the whole relationship with the real estate lender as a mortgage, and you will see references in writing to “mortgage interest rates.”Technically, though, the reference should be to “mortgage loan interest rates.”
• In some states, the security instrument is called a deed of trust. The property owner actually deeds the property to a third party, who holds the naked legal title in trust for the owner and will reconvey (retransfer) it when the debt has been paid in full. If there is a default and foreclosure, the trustee will convey the property to the successful bidder. Such states usually allow nonjudicial foreclosures.
• In other states, the instrument called a mortgage creates only a lien on real property. The borrower is called the mortgagor, and the lender is called the mortgagee. In order to fore- close, the lender usually has to obtain court permission to conduct a sale. These are called judicial foreclosures.
• In a very few states, called hybrid states, the instrument called a mortgage transfers legal title to the lender itself. The title is extinguished when the debt has been paid in full. The lender may take advantage of nonjudicial foreclosure.
• If foreclosure nets less money than is owed on the note with all interest and costs of collection, then the lender can usually sue the borrower in state court for the balance, called a deficiency. Exceptions occur if the note provided that it was nonrecourse, meaning without any personal liability by the borrower, or if state laws prohibit deficiency judgments for first mortgages on a consumer's principal residence.
• In some states, a debtor has a grace period after foreclosure within which to buy the prop- erty back for the amount of the winning bid price plus interest at the legal rate for that state. These rights of redemption may also be extended to junior lienholders and even unsecured creditors, who may wish to invest the money necessary for redemption because they believe they can sell at a profit and recoup their losses.
A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan.
The term “mortgage” or “mortgage loan” is used loosely to refer both to the lien and to the loan. In most cases, they are defined in two separate documents: a mortgage and a note.