Mortgagor

What is a mortgagor?

A mortgagor is the person who borrows money to finance the purchase of real estate using the value of the property as collateral for the loan. In simple terms, the person buying a home using a mortgage is known as the mortgagor.

Deeper definition

For most people, the purchase of their own home is a key financial goal. Because real estate is expensive, relatively few have the financial resources to purchase property outright and need some form of loan to help pay for the property.

Property finance loans, otherwise known as mortgages, are the primary way the purchase of real estate is financed. Mortgage loans are unusual in that they are for extremely long periods of 15, 30 and even 50 years.

For this reason, banks providing mortgage loans need some form of collateral security as protection against the risk of buyers not meeting their regular payments over that period.

The mortgage, which is a contract between the buyer and the loan provider, details the terms under which the mortgage loan is granted.

In the mortgage contract, the buyer is named as the mortgagor because he or she is putting up the property as surety for the loan, a process called mortgaging the property. The company accepting the property as surety is called the mortgagee.

The bank wants a reasonable assurance that it can recover its money. When you apply for a mortgage, the bank values your property and, based on its valuation, generally will agree to lend up to 80 percent of the value of the property. This means the bank has a reasonable chance of recovering its money if a default occurs.

Mortgagor example

Merle has secured a mortgage to buy a new home for $190,000. She is busy signing the documents and comes across the words “mortgagor” and “mortgagee,” and is confused.

She speaks to the closing agent who explains that she is the mortgagor obtaining a secured loan from the mortgagee, who is providing the financing she needs to buy her home.

 

Other Mortgages Terms

Guaranteed mortgage

Guaranteed mortgage is a term every borrower should know. Bankrate explains it.

Shared appreciation mortgage

Shared appreciation mortgage is a term worth understanding. Bankrate explains it.

Home Keeper

Home Keeper is a defunct reverse mortgage program. Learn more at Bankrate.com.

Life cap

Life caps limit the amount your interest rate can increase. Bankrate explains.

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