Mortgage - Defining and Understanding the Word

Perhaps few people know that "mortgage" originates from the old French term, "dead pledge." This means that the pledge ends or dies when the obligation is satisfied or when the property is foreclosed. In the world of finance, mortgage is the transfer of an interest in property to a lender as a form of security or guarantee for a debt. Mortgage is not the debt; it is in fact what secures the financial obligation.

In many countries, getting a mortgage is the primary means of buying a house, apartment, land or other forms of real property. This borrowing is most commonly called "residential mortgage loan" or "home loan" - something that most individuals and couples apply for in order to acquire a home property.

Aside from residential properties, mortgage is also applicable in the acquisition of commercial properties, such as offices, factories, stores, and warehouses. This type of debt is aptly called "commercial mortgage loan" or "commercial property loan," which is generally taken up by investors and businesspeople.

When taking a mortgage, a prospective buyer (mortgage borrower) obtains money from a bank, credit union or any form of financial institution (mortgage lender). The borrower uses the money to finance most or all of the purchase cost of a property. But at the same time, he is bound to pay the borrowed amount - principal plus interest - over an agreed period (life of the mortgage loan). To guarantee payment, the borrower will pledge the purchased property such that if he defaults or misses a payment, the lender has the right to take possession of the property held as security.

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