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Despite increasing numbers of the population having a mortgage, it is amazing how few people actually know what they are and how they work. Some people have gotten into the habit of calling them mortgage home loans but that isn’t right at all as they are not loans at all.

The borrower who is also called the mortgagor and uses a mortgage to pledge real property to the lender, also called the mortgagee, as security against the debt for the rest of the value of the property. To safeguard the interests of the lender, this document provides a form of security in the event the debt cannot be repaid.

Without mortgages being available, people and many businesses would not be able to afford the full asking price of a property if it was required they pay this amount upfront. There are also misconceptions about how they work so below is a description of how the process works.

It is because the mortgagor is often referred to as the Borrower that has led to the misunderstanding that the finance for the purchase is a loan in the same way the name Lender is used to refer to the mortgagee. The document itself produces a lien on your property which is not cleared until the debt is paid.

The property you are buying does in fact become collateral for the finance that has been sought to pay for it and is the protection a mortgagee needs if he is going to continue financing house purchases. Records of this are normally kept in the public records section of the county courthouse or a similar establishment.

So while the property is recorded as yours, there is an interest in its ownership which cannot be altered until the debt is paid off. Even if your property is mortgaged, you still own the property wholly and completely and nobody else, not even the mortgagee has title to the property.

The mortgage is a surety for the benefit of the mortgagee, so should the debt remain unpaid then the amount owed can be reclaimed by the sale of the property. This process has many names and in the United States it is referred to as foreclosure but this does need to go through the courts.

To ensure that everything is legal and above board, the court will place a ruling on the disposal in a process called judicial foreclosure. I hope this brief introduction has further helped your understanding of an important but often overlooked area of personal finance.