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What is a mortgage?

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For anyone just initiating the first steps in looking to purchase a home or condominium in Massachusetts, the best advice I can give you is educate yourself. Taking out a mortgage is one of the biggest commitments you are going to make. You are likely to take out a loan (representing by a note), and grant a mortgage to a lender that will take about  30 years, on average, to pay off. Think about that, seriously!

Thirty years, 12 monthly payments each year, 360 total payments.

Considering the daunting task and the seriousness of such commitment, there’s nothing better than figuring out how a mortgage works.

What is a mortgage? A mortgage is a security agreement that you grant to the lender in exchange for the lender permitting you borrow their money.

When borrowing money, the note is the document that contractually obligates you to pay the money back.

If you did not have to provide any collateral to the lender, there would be no need to grant a mortgage. (Think, for example, about credit cards; most credit cards are unsecured, meaning you did not provide the lender collatral should you have any trouble, and/or fail to pay them back.)

A lender lending you a significant amount of money may feel a little unsecure just taking your word for it. This is the reason the “mortgage” came into being. (In some other states a ‘mortgage’ is commonly known as a “Deed of Trust”. The document has the same effect, but the local laws provide for different paths that the lender can pursue to rememdy a default. (The steps they would follow to take your home, otherwise known as a foreclosure).

So back to a mortgage: A mortgage is a voluntarily granted security lien on a real estate property in exchange for the lending of money.

The fact that the security agreement(The  ‘Mortgage’) is granted voluntarily, it means that most new homeowners/borrowers are also waiving any right of Homestead protection that they may have.

More to follow…

This article was written by: Francisco

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