Buying and Selling

Most people borrow money in order to purchase their home. A loan for this purpose is commonly called a home loan or mortgage. The term mortgage originates from two Latin words. The first, “mort” is from the Latin word for death. The second, “gage” means pledge or promise. The word “mortgage” literally means “dead promise.” While this may seem nonsensical at first, it actually makes sense: the property was considered forfeited or “dead” to the borrower if the loan were not repaid. Similarly, once the loan was satisfied, the promise itself was dead or unenforceable.

Typically a mortgage is secured by a lien on the property. The mortgagor is the party transferring the interest in land. The mortgagee is the provider of the loan. A mortgage is paid in installments that include both interest and a payment on the principle amount borrowed. With respect to which entity has title to the property, a number of possibilities exist. Under the title theory, title to the security interest rests with the mortgagee. Most states follow the lien theory under which the legal title remains with the mortgagor unless there is foreclosure. The intermediate theory applies the lien theory until there is a default on the mortgage whereupon the title theory applies.

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