The term mortgages as used in everyday language usually means mortgage loans whereby a homeowner can obtain financing so as to purchase a home from a particular lender, like a bank or other financial institution. Another meaning for the word mortgage means that when you mortgage your home, for example, you use your property, your home, as security for a debt, usually in the form of a monetary loan. The mortgage becomes your collateral, such that should you not be able to repay the loan, the lender can then acquire ownership of the property in lieu of repayment. When you repay the loan or otherwise satisfy the terms of the mortgage, the property ownership is returned to you.
It is usually the case that mortgages are established on possessions such as a property or real estate and not on other types of possessions like cars, boats or other valuable items. Individuals and businesses can purchase real estate without having to pay for the full amount right away by acquiring a mortgage; then, they make mortgage payments, usually on a monthly basis, to continue to stay on good terms with their mortgage lenders and not face foreclosure.
The Terminology of Mortgages
The person acquiring the mortgage and the one who will owe the debt represented by mortgage is called the mortgagor, or the debtor. The lender gives the mortgage to the mortgagor or the debtor on the condition that the mortgagor continues to meet certain conditions, such as prompt, previously agreed on monthly payment of the mortgage in specific amounts. Once terms are not met, the lender can begin to foreclose on the mortgagor and take back the property in question. However, if terms are met and the mortgagor continues to make timely payments to the lender, the mortgagor will eventually pay off the mortgage in question and fully own the property, with no further monies owed to the lender.
Mortgage Types
Common types of mortgages are adjustable rate mortgages, or fixed-rate mortgages; adjustable rate mortgages may be attractive to homeowners because they usually begin with a low interest rate, but they can be difficult to manage because the interest rate may jump upward and greatly inflate payments after just a few years, rendering homeowners incapable of continuing to make payments. Fixed-rate mortgages have a somewhat higher interest rate, but mortgage payments and interest stay the same throughout the term of the mortgage, usually 15 to 30 years. Therefore, most homeowners are usually advised to get 15 or 30 year fixed-rate mortgages, unless they’re going to be keeping their homes for only a short period of time.
Further Varieties of Mortgage
There are number different types of mortgages you can get, based upon the situation in question. Most of the time, the mortgage is actually a lien on the title to the mortgage property, which the lender holds until the property is fully paid off by the mortgagor. If the lien is foreclosed on, a legal proceeding is held whereby the debt is declared to be due and in default; subsequently, the property in question is usually sold to pay the debt off.
A security deed is used in the state of Georgia, and it actually conveys real property and security of the dead to the beneficiary, which is usually the lender. However, this does not mean that the property in question is then completely removed from the debtor’s possession. Rather, the debtor can still use the property in question, provided that the debtor complies with his or her obligations.
The third type of mortgages are called the deed of trust, whereby the deed goes to a trustee to secure debt. It creates a lien on the title, but doesn’t actually mean that there’s been a title transfer; it’s different from a mortgage because it can be foreclosed if the trustee holds a nonjudicial sale. Alternatively, this type of deed or mortgage can also be foreclosed on through a judicial proceeding.