When a person applies for a mortgage loan, he pledges his property as a security against mortgage. Although mortgage is not a debt, it is an evidence of a debt. Once all the terms of mortgage are fulfilled, the property and its interest are returned to its owner. Most jurisdictions allow loans that have property in the form of real estate as security, rather than other forms of property (gold, ships etc.). Most countries have jurisdictions that allow home purchases to be funded by mortgages.

Mortgage participants

The mortgage lenders and borrowers form the participants in any mortgage loan transaction. Also called the mortgagee, a mortgage lender loans the money and makes a mortgage registration against the title to the property. The lender secures his position by declaring the borrower’s property under mortgage. The borrower, legally referred to as ‘mortgagor’ has to let his property bear the tag of mortgage until he makes all repayments. A borrower usually relies on borrowed funds for a real estate mortgage transaction.

Legal aspects of mortgage

The two types of legal mortgage include – mortgage by demise and mortgage by legal charge. In the system of mortgage by demise, the creditor becomes the owner of the mortgaged property until the loan is redeemed i.e. fully paid. In the system of mortgage by legal charge, the debtor remains the owner of the mortgaged property. However, the creditor holds sufficient rights on the mortgaged property which he can claim to enforce under certain circumstances.