Mortgagee and Mortgagor are the terms that come into use, usually in the context of home financing. Both the terms relate to the parent term ‘Mortgage,’ which means ‘collateral’ or an asset kept as security to get a loan. Often people get confused over what both these terms imply and thus, use them interchangeably. Therefore, to use the terms correctly and understand their relevance, we need to understand the difference between Mortgagee vs Mortgagor.
Mortgagee vs Mortgagor – Meaning
While the term mortgagee comes into use for the person, company, or financial institution that provides finance or loan. On the other hand, Mortgagor is a person or a company that borrows money from the mortgagee.
Mortgagee offers a loan to numerous mortgagors based on their risk profile. On the other hand, Mortgagors need to present documents that validate their eligibility for the loan and (or) keep an asset as security to get the loan. Having a secure job or a steady flow of income is just one of the many criteria that a mortgagor needs to have.
The mortgagor can submit a loan application to various financial institutions and then choose the best interest rates to get financial aid. The mortgagee is the one who decides on the number of years, interest rate, as well as the down payment that the mortgagor needs to make to avail of the loan.
Also Read: First Mortgage
Now you must have got a basic idea of what both the terms mean. To better understand both, let’s see other differences between Mortgagee vs. Mortgagor:
Mortgagee vs Mortgagor – Differences
Following are the differences between Mortgagee vs. Mortgagor:
The mortgagee is the giver of a loan. On the other hand, Mortgagor is the one who takes the loan, keeps assets as collateral, and pays interest and installments.
Agreement of home financing or loan is between the mortgagee and the mortgager. However, the mortgagee decides the term of the funding or loan. If a mortgagor chooses to take a loan from a particular mortgagee, they need to abide by the terms of the agreement, such as interest rate, number of years, and so on. Mortgagor, on his part, can decide the amount of loan that he wants (subject to a limit) and also the tenure of the loan. The mortgagor has many choices to avail the loan and, therefore, could decide on the loan that best suits them.
Once both parties agree on the terms of the loan, the mortgagee starts preparing the documents of the loan. These documents consist of details such as tenure, interest payment, guarantor, the purpose of the loan, collateral (if any), etc. Additionally, the mortgagee also prepares documents carrying rules of interest payments to give the mortgagor a clear idea of what would be their liabilities after availing of the loan.
Mortgagor, on the other hand, needs to submit all documents showing that they are eligible for the loan. Generally, the documents include proof of identity, proof of address, proof of income, etc. Only after verification and approval of these documents the mortgagee decides the amount of loan and interest that the mortgagor is eligible for.
Ownership of Collateral
Ownership of the asset that the mortgagor keeps as collateral goes to the mortgagee until the mortgagor pays the entire loan.
Terms of Payment
The mortgagee decides on the tenure and intervals at which the repayment has to be made. On the other hand, Mortgagor ensures that he abides by the deadlines and pays the installments in time.
If the mortgagor fails to pay the loan installment, the mortgagee has the right to sell the asset kept as a mortgage to recover the dues. The mortgagor must accept the mortgagee’s decision in case of default.
Rights of Both Parties
Mortgagor or mortgagee has certain rights that they can exercise. There are three principal rights that the mortgagor has:
- Right to redeem.
- If the mortgagor is entitled to redemption, then they may ask the mortgagee to transfer the obligation to a third party upon fulfillment of a condition.
- Rights to inspection and production of documents.
On the other hand, the rights of the mortgagee are:
- Right to foreclosure or sale.
- The right to sue for mortgage money.
- Right to the sale of mortgaged property in case of default by the mortgagor.
- Accession to the mortgaged property.
As said above, mortgagee and mortgagor relate to the term mortgage. And, you now know what both these terms mean. Another word that we can use for mortgagee and mortgagor is the lender and the borrower, respectively.