Mortgage Definition

A mortgage is a conveyance, or transfer, of an interest in a property as security for repayment of money borrowed. It also refers to the deed by which such a transaction is effected.

The word mortgage comes from the Old French words for death pledge. This may have referred to the fact that if the borrower did not pay the debt, the property is taken from him or her forever, and if he or she does satisfy the debt then the pledge is dead to the mortgagee. Today, in many mortgages, the borrower can remain as the legal owner of the property. However, the creditor gains sufficient rights to enforce their rights to the property, including the right to take possession of the property or sell it should the borrower not meet his or her obligations under the mortgage. Mortgage is very often misspelled. Common misspellings of mortgage include morgage, mortage, mourgage and morgauge. It is often abbreviated as "mtg".

Mortgages are heavily regulated since a person's home typically represents the largest single investment in their lifetime. The regulations vary depending on your location. In the U.S., federal, state and local regulations can impact the type of mortgages that may be available to you.

In the U.S. when a homeowner gets a mortgage he or she must sign many documents. These can include, but are not limited to the following:

• Deed of Trust - conveys the interest in the property.
• Note - specifies the terms of the loan, including the loan amount, the interest rate, the amortization period and balloon period.
• Loan Estimate - summarizes the terms and closing costs of a loan as it was originally quoted to the borrower.
• Closing Disclosure - statement of final loan terms and closing costs. Compare this with the Loan Estimate.
• Adjustable Interest Rate Rider - specifies how the interest rate changes for adjustable rate mortgages.
• Prepayment Penalty Rider - describes the prepayment penalty, if any.

Mortgages can come in a wide variety of types. The interest rate can be variable or it can be fixed for the life of the loan. The minimum payment can be fully amortized or interest-only. Loan terms can be tailored to borrowers in wide variety of credit and income situations. Some loans may have prepayment penalties or have a large balloon payment due at the end of their term.