Do you know the difference between a mortgagor and a mortgagee?

Many home buyers do not understand what the difference is between a mortgagor and a mortgagee. It is easy to get confused because some of the terms in mortgage agreements are used interchangeably. For example, the term “pledger” can also be referred to as the grantor or shipper.

The difference between a mortgagor and a mortgagee is that the former refers to individual loans and the latter refers to the legal or natural person providing financing.

Another way to remember the difference is to use word association tricks. For example, the words used to describe a borrower — pledger, grantor, shipper — include the letter “o”. The words used to identify the pledgee lender, grant recipient and recipient include the letter “e”.

Mortgage bills are secured by a bill of exchange, which is a written promise to return the borrowed funds. IOUs for real estate are legal documents, so mortgagers must read the fine print before attaching their signature.

Bills of exchange provide all parties involved in a transaction with details. The document must include the principal amount of the loan, the interest rate, the dates and amounts of payments, the amount of the penalty for early repayment, the condition of default and the date of repayment.

The principal amount of the loan depends on the value of the house. Lenders charge interest on the principal. The interest rate depends on various factors, including the type of loan and the FICO score of mortgages. Borrowers with excellent ratings receive lower interest rates than those with good or average scores.

Most lenders impose prepayment penalties in the event that borrowers repay the loan early. Pledgers should review the Truth in Lending (TIL) statement provided in loan agreements. In addition, people applying for a loan are given a bona fide score that includes the amount of the fine.

There are good and bad sides to getting mortgage loans that contain a prepayment clause. On the positive side, such loans have a low interest rate. The downside is that mortgagers can suffer losses if they sell their home or pay off the loan too early.

The biggest mistake shoppers can make is to neglect comparisons to store lenders. Finding the best deal can help buyers get lower interest rates and lower estimated costs. Reducing the interest rate by a quarter can lead to savings of several thousand over the life of the loan.

Few would argue that buying a home is a complicated process. However, learning how the process works will increase confidence and enable shoppers to make informed decisions.

Several sources provide information on home ownership. Some of the more credible include the Department of Housing and Urban Development, Fannie Mae Homepath, and Freddie Mac Homesteps. In addition, the FDIC offers a free home buying guide filled with valuable information.

By and large, real estate purchase is the most important purchase we have ever participated in. For this reason, it is very important to research everything you can to make your home purchase a hassle-free experience. Failure to do so could result in unfounded decisions leading to a foreclosure, damaging credit ratings.

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