The most important thing you must realize about a mortgage is that what you believe it to be is actually wrong. They are not for instance a loan, even though the vast majority of people believe they are and often refer to them as a mortgage home loan.

The mortgagor is the person who owes money to the mortgagee (the person who finances the deal) using a legal contract called a mortgage. In fact, in reality, this isn't the debt but the security required by the lender to protect their interests for the duration of the term.

The mortgage has made it possible for people and companies to buy properties with only a small percentage of the purchase price as a deposit. The following information will give a more rounded understanding of how the whole process operates.

Unfortunately it is our own common use of word like Borrower and Lender that has mislead people into thinking a mortgage is a loan when they should be referred to as Mortgagor and Mortgagee respectively. The security the mortgagee uses is called a lien which is a legal term that stays in force until all monies are repaid.

The mortgagee's money is then protected by this knowing the property is in fact security against its own debt. Information about the lien is registered at a county courthouse, or similar, to ensure the contract is official and binding.

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. This is a strange situation where the mortgagor still owns the property even though the debt still remains to be paid.

The only right that your mortgage gives to the mortgagee over your property is to sell it to recover funds in the case that you do not pay off your debt. If in the unfortunate event this happens, the process whereby the funds are reclaimed is called foreclosure.

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.