What’s the difference between mortgagee vs mortgagor? The mortgagee is the lender, the mortgagor is the borrower. Now, why do we not use simple words and make things so complicated?
Leo Tolstoy’s “War and Peace” and “Finnegan’s Wake” by James Joyce can fight for the title of the “hardest to read” book, but we’re pretty sure that both Tolstoy and Joyce would chicken out of reading a standard mortgage loan pack of documents.
Sometimes it’s just impossible to understand what are you even reading and what all those magic words mean. However, you still need to do it. Your money and your home are at stake! Let’s fight two of the most popular terms you’ll see in the papers: mortgagee and mortgagor.
Mortgage vs Mortgagor Meaning
While these two may look hard to grasp on — understanding the roles is just as simple as it is crucial.
Mortgagee definition: the one who gives the money in exchange for the borrower’s promise to repay it. Mortgagee roughly translates to normal English as “the lender”.
Mortgagor definition: the borrower in the loan transaction who receives the money. If you buy a house and get a loan — you are the mortgagor. In normal terms, it means “the borrower”.
That’s it. Pretty simple, isn’t it? However, understanding “mortgagee vs mortgagor” is just the tip of the iceberg.
Other Hard to Understand Words in the Mortgage Process
Morgage paperwork is filled with weird wording. You may know some of them, maybe you even know all, but trust us — the absolute majority of people never use these terms in everyday life. Yet, they need to understand every single word when the time to sign the papers comes. Here are some notable examples:
- Abandonment: i.e., the borrower abandoning the property. It’s an important term if a mortgagee sells the property after defaulting on the mortgage. In this case, “abandonment” means that the borrower abandoned their house, and there is no good reason why that would ever happen.
- Defaulting: i.e., the borrower doesn’t pay the money, and the mortgagee files a foreclosure lawsuit.
- Lien: i.e., the mortgagee’s claim on the property.
- Deficiency judgment: i.e., you can be sued after foreclosure by the mortgagee for any money difference between the loan and the property value.
- Foreclosure: i.e., the lender initiates a lawsuit or, in some states, an administrative proceeding to take away the mortgagee’s house because the borrower has failed to make payments.
- Common-Law: i.e., when you default on your loan payments, the lender is entering into common law terms with you when he can take away your property. Equity: money above and beyond what is owed on loan.
- Loan Servicing: i.e., the task of the person who takes care of all payments for you, usually a third-party service provider.
- Loss mitigation: i.e., a defined program that enables you to keep your property if your property is worth more than what you owe for it.
- Adjustment Date: i.e., the day your monthly mortgage payment is adjusted to take into account property taxes, insurance, or other fees.
- Escrow Account: i.e., you are paying your taxes and insurance separately through your lender or a third party.
- Prepayment Penalty: i.e., the charge if you pay off your loan ahead of time.
- Prorate, ie. If you prepay, you can ask for “prorated interest,” whereby the interest is calculated over the entire period of the loan, not just on what’s owed.
- Adjusted Selling Price (ASP): i.e., if your house value exceeds your principal balance, you can ask to take out an additional amount of principal money to pay off the difference.
Now, we won’t turn this article into a full-scale glossary o ALL the terms you may encounter in your papers. It would be just enormous!
Why are Mortgage Papers so Hard to Read?
Why do things need to be so complicated? Why not just use “lender” and “borrower”? Well, there’s a full pack of good reasons for it, and unfortunately — all the difficulties are justified.
Mortgage papers are so long and so hard to read because:
- They’re extremely important and touch your money and your home — possibly even define a once-in-a-lifetime deal;
- High stakes require that everything is clear and precise; you need to use terms that have just one meaning and can’t be twisted in any way;
- Everything needs to be backed up with adequate legal terms — every exact word matters because the law is all about precision and exactness.
So originally, your financial safety and risk management are the reasons behind all the quirky abbreviations you’ll find in the text.
How to Read Mortgage Papers Right not to get Screwed?
Unfortunately, banks know that you don’t understand about half of all the words you see for the first time, and some of them may try to use it against you. Here’s how to be prepared:
- Google literally every single word you don’t understand. Usually, it’s just a matter of a simple Google search to figure out the meaning;
- Seek help from professionals if you have any issues with your mortgage terms — some people make their living reading those papers for you and get paid to act in your best interests;
- Do at least some basic math — not to screw the bank, but to understand completely why every number in the agreement stands where it does;
- Do not rush — slow and steady wins the race, do not panic and try to change anything agreed upon at the signing or during the negotiations. Carefully make a list of all the things that look questionable.
The last — and probably the most important advice: Don’t be afraid to ask questions and maybe “look stupid”.
It’s the only way to get clarity and prevent any surprises. It’s quite likely that you will never hear anything different than what was written in the paperwork. However, you will look stupid ONLY if you’ll sign everything the bank gives you without reading it carefully.
Mortgagee vs Mortgagor: The Bottom Line
Mortgage papers are one of the most confusing and, at the same time, crucial parts of a financial transaction you’ll ever do. That’s why it’s so important to know all their esoteric features and be able to read every single word. Be a good mortgagor — don’t let the mortgagee screw you with fancy words.