Understanding the Mortgage Finance Process

In simple terms, getting mortgage finance is the process of providing finance to individuals and business entities, to secure properties, and the finance is repaid through timely and consecutive monthly installments.

To understand the mortgage finance process, you must first try and understand the basic idea behind mortgages.

Mortgage – Definition
A Mortgage is a legally binding agreement that conveys the conditional right of ownership of a property by its owner (the mortgagor) to a lender (the mortgagee) as a form of security for a loan with the condition that the conveyance of the title becomes void upon the repayment of the debt.

Are Mortgages Legally Enforceable?
Yes, they are. In order to be legally enforceable, the mortgage must be for an agreed term, and the borrower must have the right of redemption on payment of the full debt or on before the end of that term.

Why is Mortgage Finance Common?

  • Here is a list of why it is the most common type of debt instruments
  • They have a lower rate of interest (because the loan is secured)
  • They are straight forward and have standard procedures
  • They have a reasonably long repayment period.

Who has the Right of Possession?
The right of possession and use of the mortgaged property normally remains with the mortgagor. But, the mortgagee has the right to take possession of the Security.

What is a Security Document?
The document by which the agreement is effected is called a “Mortgage Bill of Sale” or simply just a “mortgage.”

What Happens in the Event of a Default?

In the event of a default, the mortgagee will:

Appoint a receiver to manage the property (if it is a business property), or obtain a foreclosure for a court to take possession and sell the property.

Glossary of Common Terms Used

  • Mortgagor – the borrower of funds
  • Mortgagee – the lender/credit provider of funds (e.g. a bank or credit union, etc.)
  • First Mortgage – a mortgage that has priority over all mortgages and liens except those imposed by law
  • Credit File – Details your credit history and record of repayments based on a credit score
  • Second Mortgage – a mortgage that is subordinate to a first mortgage

So, now that you have read this information guide, you should have a good basic understanding of mortgage finance. It will help you in obtaining the right finance for your real-estate property.