When you finally close on your home loan you'll have many different forms and contracts to read over and sign to make things official. One of these contracts is your mortgage agreement. The mortgage agreement is a binding contract required for just about any basic home mortgage loan. This contract is your promise to pay the mortgage and abide by the loan's terms.
A mortgage is not the actual money that transfers hands from the lender to the seller in a real estate transaction. It's the interest in the home itself. It's a pledge from the new homeowner that in case of default, he will give up his claim to the property to the lender. The official name for this pledge is a property lien. Keep this fact in mind as you seek to understand the purpose of the mortgage agreement.
The mortgage agreement is a contract made between the lending bank, called the mortgagee, and the borrower, called the mortgagor. This agreement states that the borrower receives the funds she needs to purchase the home while the lender receives a lien on the property. It allows the borrower to take physical possession of the house as she pays off the loan. If the mortgagor defaults on the terms of the loan, this agreement gives the mortgagee the right to take the property and sell it to recover their money. By signing this agreement, you agree that your ownership and use of the property are contingent on making your mortgage payments as agreed.
Components of the Agreement
Though the exact language of the contract varies by lender, you'll find a few common sections in most standard mortgage agreements. For one, the mortgage agreement lists basic information that the mortgagor agrees to regarding the loan, including the amount borrowed and any additional costs associated with the loan. It commonly makes reference to other loan documents in the closing paperwork that set forth the exact terms of the loan, including the repayment term, payment amounts, and the interest rate associated with the mortgage.
Without this agreement, the loan isn't officially a mortgage loan. It's just a standard promissory agreement where one party promises to pay the other in regular installments until the obligation gets paid in full. Both the bank representative and the principal borrowers must sign the agreement in the presence of a notary public. Also, the lender must file this mortgage agreement with the local county so that the county administrator can update the public records.
- What Is a Lien on the Property That Secures the Promise to Repay a Loan?
- Definition for Transferable Mortgage
- Title Vs. Deed of Trust
- Legal Mortgage Vs. Equitable Mortgage
- What Is a Successor in Interest on a Mortgage Deed?
- Who Owns the Deed of Trust?
- Mortgage Vs. Deed
- Do I Get the Deed After I Pay Off My Mortgage?