MORTGAGE

A mortgage is a pledge of property to secure the payment of a debt. The borrower, who owns the property, is called mortgagor and the lender, who provides the money, is called mortgagee. The properties that can be mortgaged are typically real estate and the loan payment can be paid off by instalments over a fixed period. Most mortgage loans are originated with a 30-year original term, although different maturities can be offered, and the repayment includes both capital and interests (repayment mortgage). The repayment can also be the interest rate only, while the principal repayment can be paid by means of a separate arrangement (i.e. an endowment assurance policy). The typical mortgage provides that the mortgagee may take possession of the property and the mortgagor is allowed to redeem the property before the end of the mortgage period. There are several types of mortgages according to their specific features (interest rate, repayment method, insurance...) and the legislations in force (i.e. in the UK, under the Law of Property Act (1925), there are two categories of mortgages, legal and equitable). In case of default, the mortgagee may initiate a legal procedure to obtain the judicial sale of the property secured (foreclosure).
Bibliography
Fabozzi Frank J., Jones Frank J., Modigliani F. (2010), Foundations of Financial Markets and Institutions (Fourth Edition), Pearson Education, Inc.
Editor: Bianca GIANNINI
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