Definition:
A mortgagor is a borrower in a real estate transaction—the person or party who takes out a mortgage loan to buy the property and agrees to repay it over time. The mortgagor gives the lender (the mortgagee) a legal interest in the property as collateral.
Example:
Jacob buys a home and takes out a mortgage loan from his local credit union. In this case, Jacob is the mortgagor because he is borrowing money to purchase the property and pledging the home as security for the loan.
Explanation:
The mortgagor is the individual or entity that applies for and receives a mortgage loan. In exchange for financing, the mortgagor agrees to repay the loan in scheduled payments, typically over 15 to 30 years, including both principal and interest.
As part of the mortgage agreement, the mortgagor allows the lender (mortgagee) to place a lien on the property. If the mortgagor fails to make payments, the lender has the right to foreclose and sell the property to recover the unpaid balance.
Key responsibilities of the mortgagor include:
- Making timely monthly mortgage payments
- Maintaining the property
- Paying property taxes and insurance
- Complying with the terms of the mortgage agreement
Mortgagors may be individuals buying a home to live in, investors purchasing rental properties, or business owners acquiring real estate for commercial use.
Why is Mortgagor Important in Real Estate Transactions?
The mortgagor is at the heart of most real estate transactions since they initiate the purchase and financing process. Understanding the role of the mortgagor helps buyers know their rights and responsibilities. For sellers, a qualified mortgagor means a more secure transaction. Lenders also assess the mortgagor’s financial stability to ensure the loan is a sound investment.