mortgage

A legal document by which the owner (i.e., the buyer) transfers to the lender an interest in real estate to secure therepayment of a debt, evidenced by a mortgage note. When the debt is repaid, the mortgage is discharged, and a satisfactionof mortgage is recorded with the register or recorder of deeds in the county where the mortgage was recorded. Becausemost people cannot afford to buy real estate with cash, nearly every real estate transaction involves a mortgage.
The party who borrows the money and gives the mortgage (the debtor) is the mortgagor; the party who pays the money andreceives the mortgage (the lender) is the mortgagee. Under early English and U.S. law, the mortgage was treated as acomplete transfer of title from the borrower to the lender. The lender was entitled not only to payments of interest on thedebt but also to the rents and profits of the real estate. This meant that as far as the borrower was concerned, the realestate was of no value, that is, "dead," until the debt was paid in full—hence the Norman-English name "mort" (dead),"gage" (pledge).
The mortgage must be executed according to the formalities required by the laws of the state where the property is located.It must describe the real estate and must be signed by all owners, including non-owner spouses if the property is ahomestead. Some states require witnesses as well as acknowledgement before a Notary Public.
The mortgage note, in which the borrower promises to repay the debt, sets out the terms of the transaction: the amount ofthe debt, the mortgage due date, the rate of interest, the amount of monthly payments, whether the lender requires monthlypayments to build a tax and insurance reserve, whether the loan may be repaid with larger or more frequent paymentswithout a prepayment penalty, and whether failing to make a payment or selling the property will entitle the lender to call theentire debt due.