Mortgagor

What is Mortgagor?

A mortgagor is the person or organization that borrows money from a lender so that they can purchase a piece of property, typically a residence, and offers a guarantee of that property in exchange for the loan.

The mortgagor is basically the owner who finances their house using a mortgage and agrees to pay back the loan in the future, adding interest payments perhaps.

Once he becomes a mortgagor, he withdraws a mortgage deed that contains information regarding the amount borrowed, repayment period, rate of interest, and conditions. The very property acts as security for the lender (mortgagee) in the form that if the mortgagor fails to repay the amount, the lender can recover his money by way of repossession through foreclosure.

Principal Duties of a Mortgagor

• Payment of periodic mortgage installments (interest and principal) in time.
• Maintaining the property in a good state to preserve its value (repairs, maintenance).
• Payment for homeowners insurance and property taxes, typically through an escrow account that is linked to the mortgage.
• Maintaining the terms of the mortgage agreement so as not to default.

Why it Matters?

The mortgagor's status is central to the mortgage transaction because whether or not he or she will be able to repay the loan will dictate his or her future financial destiny, along with the lender's risk. Lenders will review a mortgagor's credit report, income, and debt level before they will provide a mortgage.

Example in Practice

Let us say Jane wants to buy a home. She takes out a loan (mortgage) from the bank of $300,000, and the bank pays her the money. The mortgagor (Jane) is now paying each month to the mortgagee (bank) for 30 years. If she defaults on the payments, the bank can take her home back, but if she pays every month in a timely fashion, she will own the house free and clear.

Fun Fact

The term "mortgagor" is an Old French coinage of mort, or "death," and gage, or "pledge"—a reference to the fact that the loan is a pledge until paid in full or "dead."

A mortgagor is simply one going after the American dream of homeownership, mailing monthly installments to convert a loan into a house of their own.