A person or business entity that seeks to borrow money to buy a home, piece of property, or real estate.
A mortgagor is a person or business entity that seeks to borrow money to buy a home, piece of property, or real estate. A mortgagee is a person or financial institution willing to lend the money to buy the property.
"Mortgagor" is a technical term usually used in the financial industry to describe a type of borrower. This term is not too familiar outside legal contracts, and banks often use the term borrower to simplify the mortgage contract.
Not all people who borrow are mortgagors. The term only applies to people who borrow money (get a mortgage) to buy a piece of real estate. In contrast, a loan can be credit cards, student loans, auto loans, and many others.
They receive mortgage loans based on creditworthiness and credit history. By reviewing that, a decision is made by the mortgagee whether to lend or not. Note that the mortgagee is the lender that receives the signed mortgage.
They apply for a mortgage loan using their credit history and other statements. Also, they have to pledge the property title as collateral for the loan. The mortgagee generally decides the loan terms that they must agree to.
After assessing the submitted documents of the mortgagor, the mortgagee decides if the borrower is eligible for the loan. Then, the borrower must commit to the loan repayment, which has to be paid in installments, plus the interest rate.
An approved mortgage loan requires the mortgagor to commit to the loan's terms. The loan specifies the duration and interest to be paid in addition to the principal each month so that borrower will remain in good standing throughout the loan term.
Remember that the mortgagee has the authority to take possession of the pledged property if failing to adhere to the mortgage terms. For instance, when the mortgagor fails to abide by the terms of the mortgage, this is considered a default.
The most common way of default is falling behind on the monthly mortgage payments.
Mortgagee vs. Mortgagor
In brief, the mortgagor is the borrower, whereas the mortgagee is the lender. The mortgagee is in charge of regulating the terms of the mortgage agreement and must disclose all the contract's information to the mortgagor before any agreement on the mortgage loan.
After deciding which lender to choose, the mortgagor applies for the mortgage by providing all necessary information requested by the lender, such as proof of the capability to pay the required monthly payments.
In particular, the lender will ask for bank statements, credit history, tax returns, and employment statements.
The borrower can apply for a mortgage after choosing a piece of property or while searching for one. The latter is known as mortgage pre-approval. After the approval, the mortgagee will offer the loan with an interest rate to be paid monthly.
The most common mortgage durations are the 15-year and 30-year mortgages. There are several types of mortgage loans offered, such as:
For the fixed-rate mortgage, the interest rate remains the same throughout the loan term.
The adjustable-rate mortgage, in which the interest rate can change throughout the loan term, depending on the prevailing interest rate in the market.
Afterward, when both parties have agreed to the terms of the loan, they meet for the closing. In that event, the borrower will make a down payment and receive ownership of the property. After the completion of repayment, the mortgagor will receive full ownership of the property.
The Mortgagor's Rights Of Redemption
The right of redemption is valuable when the borrower defaults on the mortgage and tries to protect the property pledged as collateral. Therefore, when the borrower experiences foreclosure, they must pay the entire amount due on their mortgage to redeem the property.
The right of redemption is very important for those who are facing foreclosure. It is also noted in the mortgage note as a right for the borrower to keep their property safe in cases of failure of payment or breaching the mortgage contract.
There are two types of right of redemption
- The statutory right of redemption
The statutory right of redemption authorizes the borrower to reclaim their property within a certain period after the foreclosure. Usually, it happens by paying the foreclosure price.
- The equitable right of redemption.
The equitable right of redemption gives the borrower the authority to redeem the property by paying the entire amount owed to the lender before the foreclosure.
For instance, in the United States, some states give borrowers the privilege to benefit from both the equitable and statutory right of redemption. In contrast, other states only provide the equitable right of redemption.
Therefore, it is necessary to read the mortgage loan contract before taking the loan and rereading it in case of an emergency since borrowers usually are unaware of the privileges they have when falling behind on payments and defaulting.
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