Who owns your house?

by Chris Lang on January 12, 2011

Mortgage Terminology Peter and Fiona have bought a house. They paid a deposit from their own money and took a mortgage loan in a bank to cover the rest (the loan was guaranteed by the house).

The question is: who owns the house, Peter and Fiona or the bank?

You will find the answer to this question and explanation of the complex mortgage terms in a simple human language in today’s article by Mrs Mortgage. Happy reading!

Mortgage And Mortgage Loan

A mortgage is a form of security for a loan, usually taken out over real estate. Legally, a mortgage gives the lender the right to take the property if the borrower fails to repay the loan.

A mortgage loan is a type of loan account. Our tendency to abbreviate just about everything has resulted in a ‘mortgage loan’ becoming, simply ‘mortgage’. So, when we say we are taking out a mortgage to buy our new house, we really mean we are taking out a loan which will be secured by a mortgage over the property.

Mortgagee and Mortgagor

The mortgagee is the person or organisation providing the mortgage loan – the lender.

The mortgagor is the party providing the security for the loan. This is usually, though not always, the borrower.

Types of Mortgages

There are two types of mortgages in Australia:

  • Mortgage by way of charge
  • Mortgage by conveyance

Mortgage by way of charge

Mortgages that form a ‘charge’ over a property are the most common in Australia. They are typically used for Torrens title and leasehold title property.

The mortgagor remains the legal owner, and the mortgagee is said to have an ‘interest’ in the property.

Once the loan has been repaid in accordance with mortgage conditions, the mortgagor is entitled to have the mortgage removed (or discharged).

Mortgage by conveyance

This type of mortgage is used under the old system of property title. It results in the mortgagee becoming the legal owner of the property. In other words, the property is ‘conveyed’ to the mortgagee.

The mortgage provides the mortgagor with a contractual right to redeem the property when the loan has been repaid. At this time, the property is ‘reconveyed’ from the mortgagee to the mortgagor. This type of mortgage is no longer common in Australia.

How are mortgages used?

The primary use of mortgage is to allow people to purchase homes with a relatively small deposit.

As property is generally seen as a sound investment, mortgages are also used to finance the purchase of investment property for rental.

Mortgages can also be used to unlock funds tied up in property, allowing for the finance of other forms of investment, such as shares, or lifestyle acquisitions such as cars.

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{ 1 comment… read it below or add one }

shane January 27, 2011 at 3:26 am

It is very informative. Thanks for posting dude.

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