You’ll notice that whenever I talk about mortgages, I actually say “mortgage loans”. That’s because, if you buy a home and you borrow the money, you’re not paying your “mortgage”, you’re paying your “mortgage loan”.
Here’s a better explanation:
Most of us are accustomed to calling our home loan a mortgage, but that isn’t an accurate definition of the term. A mortgage is not a loan, and it is not something that the lender gives you. It is a security instrument that you give to the lender, a document that protects the lender’s interests in your property.
How a Mortgage Works
* There are two parties to a mortgage. You are the mortgagor, or borrower, and the lender is the mortgagee.
* A mortgage document creates a lien on the property, which serves as a lender’s security for the debt. The lien is recorded in public records, probably at your county courthouse.
* Ownership cannot be transferred to someone else until you pay the debt to release the lien.
* Even if your loan is secured by a mortgage, you still have full title to the property. No one else has rights of ownership.
* A mortgage gives the lender the right to sell the secured property to recover funds if you do not pay the debt. The sales process is called foreclosure.
* When a mortgage is used for security, foreclosure must usually progress through the court system. That type of foreclosure is called a judicial foreclosure.
Home Buying – A Mortgage is Not a Home Loan – About.com
Of course, in the real world, just about everyone uses the term “mortgage” to mean “mortgage loan”.
Doesn’t mean it’s right!