Definition of a Mortgage
A mortgage is a lien against real estate in exchange for the repayment of money. A mortgage may be for a loan used to purchase the real estate, or for money loaned after the real estate is purchased. In either case, the real estate is used as security for the money lent, or mortgage loan, and the mortgage is the security agreement. Mortgages are public documents and are recorded.
Simply put, a mortgage is the loan used to secure ownership of a property.
How a Mortgage Works
When you obtain a mortgage loan, you will sign a covenant promising to repay the amount borrowed according to the terms outlined in the loan agreement. You will also sign a mortgage, giving the lender a lien or security on the property. In the event you do not pay back the loan, the lender has the right to sell the property to complete repayment of the loan. If there is more than one mortgage, the first mortgage is paid before any secondary mortgages are paid, if there is enough left over from the sale.
The lender will not own the property through a mortgage loan only retain a lien on the property. You are generally free to do with the property as you wish, except that transferring the property without paying off the mortgage is usually prohibited without the lender’s permission.
There may be more than one mortgage on a parcel of real estate. Mortgages filed later in time are called second (or third) mortgages. Because they are considered inferior, the first mortgage gets paid out first in the event of default.
Mortgages are recorded on land title certificates which are public documents recorded at the Land Titles Offices in the city or province where the real estate is located. Public recording informs the public that a lender has a security against the real estate.
Searching the public documents allows a potential lender, or a potential purchaser of the property, to verify the number of liens on the property and in what amounts. Public recording protects the mortgage holders as well as potential lenders.
Mortgages are what we do here at First Foundation Residential Mortgages. One of our professional mortgage brokers would love to work with you!
If you are interested in learning more about mortgages, please feel free to contact us today!