While mortgages are the most common way of buying a home, it is remarkable how few people actually understand what a mortgage is. Often referred to as a mortgage home loan, they are not a loan in the traditional meaning of the word. The property becomes a security (and legally binding contract), or mortgage, for the buyer, or mortgagor with the finance supplied by the mortgagee. What this means is this document is a way for the property to be used to safeguard any potential problems with payment until the house is finally paid for.

The facility that a mortgage creates means individuals and companies can acquire land or property without needing the full face value to purchase it at the time. Misunderstandings on how the system operates also creates problems but the crucial points are dealt with during the remainder of this article. The problem arises because so many people refer to the buyer as the Borrower and the financier as The Lender which leads people to believe that the money has been loaned which is not the case. The security the mortgagee uses is called a lien which is a legal term that stays in force until all monies are repaid.

The property you are purchasing does become collateral for the finance, that has been applied for, to pay for it and is the protection a mortgagee needs if he is going to continue financing further house purchases. This lien is recorded within public records likely to be found at a county courthouse or similar establishment. Ownership of the property is then yours and cannot be transferred to anyone else until you have paid off the amount required to reverse the lien. So how this works is that the mortgagor (you) owns the property completely even though the mortgagee has possession of the mortgage but not the title.

This means the only occasion that can arise whereby the mortgagee can legally sell your home is if you stop making payments and it needs to be sold to repay the finance used to purchase it. Should they need to reclaim these costs then the case will be held in court and the procedure called foreclosure will be started. This is a further step but it is a legal formality which needs to be taken and is often referred to judicial foreclosure. This is quite a short introduction to this subject, as it is much more complex, but this information should help make this important issue much clearer.