Mortgagor

Financial Dictionary -> Mortgages -> Mortgagor

In a mortgage agreement, the mortgagor is the borrower of the property loan, which is commonly known as the mortgage. Although it is used as blanket term, it specifically refers to borrowers that pledge collateral, usually the home they purchase with the mortgage, or an existing property. The word comes from this process of pledging collateral, because that is what is being "mortgaged"; therefore the borrower is the mortgagor. The term is often spelled mortgager.

Because houses are very expensive and people rarely have the full amount of cash to buy one outright, it is universally common to take out a mortgage loan to fund the purchase, and pay it back over an extended period, for example 30 years. It is considered a lifetime investment.

A potential mortgagor will visit a bank or other financial institution and request a mortgage. After some credit history checks to ensure the mortgagor is capable of taking on the loan and paying it back efficiently, the loan will be granted. This money is then used to purchase part or all of the home (depending on the terms or deposit amount) and the mortgagor will be granted the temporary title of the home. Although mortgagor is now commonly called the homeowner, they do not technically own the home, because they bought it with debt money.

Over the term of the mortgage the mortgagor will pay a monthly fee with interest to gradually pay back the loan. As they do this, they will build equity in the house and slowly own a larger percentage with every repayment. When the mortgage is fully paid off, they then are the true owner's of the home and would benefit from the full sale price should they sell it. It is possible to get a second loan on the equity in a property, in order to free up the cash, although this can be dangerous.

If a mortgagor defaults on repayment, the house can be foreclosed and sold on by the lender (mortgagee) to cover the loss.