Definition:
A mortgagee is the lender in a real estate transaction—the bank, credit union, or financial institution that provides the mortgage loan to the borrower (also called the mortgagor).
Example:
When Sarah buys her first home, she takes out a mortgage from XYZ Bank. In this case, Sarah is the mortgagor (borrower), and XYZ Bank is the mortgagee (lender).
Explanation:
In every mortgage agreement, there are two parties:
- Mortgagor – the borrower (the person buying the home)
- Mortgagee – the lender (the entity providing the loan)
The mortgagee provides funds to help the borrower buy a property. In return, the borrower agrees to repay the loan over time, usually in monthly installments that include both principal and interest. To protect the mortgagee, the property acts as collateral—meaning if the borrower defaults, the mortgagee has the legal right to take ownership through foreclosure.
The mortgagee is responsible for:
- Evaluating the borrower's credit and financial history
- Approving the mortgage terms
- Funding the loan at closing
- Managing the loan or assigning it to a loan servicer
In some cases, the mortgagee may also offer pre-approval or rate lock services during the home search and purchase process.
Why is Mortgagee Important in Real Estate Transactions?
The mortgagee is essential because they makes it possible for most buyers to afford a home. Without a lender providing financing, many real estate deals wouldn’t happen. For buyers, choosing the right mortgagee affects the loan terms, interest rate, and overall experience. For sellers, a reliable mortgagee ensures the buyer’s financing is solid, reducing the risk of a delayed or failed closing.