Updated on March 19, 2024
Article byWallstreetmojo Team
Edited byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Mortgagor Definition

A mortgagor is an entity that borrows money from a lender or financial institution to purchase real estate. Functionally, they are the same as the borrowers or debtors who are obliged to repay the mortgagee or lender.

The mortgagor enters a secured loan arrangement by pledging the real estate property as collateral. The borrower is legally responsible for paying periodic mortgage payments in regular intervals during the loan tenure based on the mortgage terms. After the borrower completes repayment, the mortgagee will return the borrower’s collateral and full ownership rights.

Key Takeaways

  • A mortgagor is an individual or other entity that borrows money by pledging the property to finance its purchase.
  • The mortgagor is liable to pay regular periodic mortgage installments to the lender until the completion of repayment. After its completion, the mortgagee returns the full ownership right to the borrower.
  • A loan seeker can select the best mortgage lender. If the loan seeker has certain qualities like a good credit score, stable job, regular income, and adequate cash reserve, getting a mortgage and becoming a mortgagor is easy.

Mortgagors Explanation

The mortgagors have to go through complex procedures to obtain a secured loanSecured LoanSecured loans refer to the type of loans approved and received against a guarantee or collateral. If they fail to do so, the lending institution acquires the collateral to compensate for the amount that the borrowers were more which may take days or months to complete the transactions. They invest in real estate since its value appreciates. Factors like economic development and policy changes contribute to value appreciation. Many people wish to own a house and stop paying rent. However, in many countries obtaining a house is expensive mainly due to the escalated cost of land, labor, and building materials. Hence, they opt for mortgage loans.


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People can buy real estate without waiting years to earn the required funds. For instance, they can buy a house and live in it using a mortgage loan while paying monthly mortgage installments. However, the house technically belongs to the mortgagee as collateral until the mortgage is paid off in full. At this point, full ownership of the house is given to the buyer. However, there are cases in which the borrower defaults the payment after paying a few initial periodic payments. In that case, the lender retains the borrower’s property to recover the loan amount, and they are not liable to return the payment and origination fee made by the borrower.

Mortgagors are usually bound to the lender for long periods, typically one or two decades. The interest rate depends on factors like down paymentDown PaymentDown payment is the initial deposit made by the buyer to the seller when purchasing an expensive item, such as residential property or a car. It comprises a portion of the total purchase amount of the asset and takes place via cash, bank check, credit card, or online banking. read more, the company they get the mortgage from, and negotiations. Some people buy a property that they can sell later. These types should choose the property they buy carefully. It avoids the risk of buying real estate and not selling it. Factors that could lead to this include an unattractive location, overpriced property, property in bad condition, and cheap fittings in the home.

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Mortgagor Example

John is a US private sectorPrivate SectorThe private sector is a section of the national economy that the government does not own. The business conducted under this sector is carried out by companies or entrepreneurs who focus on profit maximization and customer more employee. He is young and has just gotten a stable job. So, John is planning to buy a home. However, since he did not have the required amount to purchase the house, he decided to obtain a mortgage loan. For many people, securing home loans is an essential part of the home-buying process. Because home will be the largest purchase of their lives, it is vital to investigate the best mortgage lenders.

The mortgage industry in the United States is well established, and obtaining a mortgage in the United States may be easy and fast, with some buyers finishing in weeks. John may choose to become a mortgagor by obtaining the mortgage. Before that, he has to pass many hurdles like improving his credit score, calculating the affordable loan amount using a mortgage calculator, researching the various types of loans available, gathering all required documents. In this case, John is the mortgagor, financial institutionFinancial InstitutionFinancial institutions refer to those organizations which provide business services and products related to financial or monetary transactions to their clients. Some of these are banks, NBFCs, investment companies, brokerage firms, insurance companies and trust corporations. read more lending the money is the mortgagee.

Affordability is an essential deciding factor in whether or not John will be offered a home loan in the USA. To get the mortgage loan, John has to optimize his credit rating if it is not good. Lenders usually calculate how much they can offer a mortgage loan seeker based on factors like gross incomeGross IncomeThe difference between revenue and cost of goods sold is gross income, which is a profit margin made by a corporation from its operating activities. It is the amount of money an entity makes before paying non-operating expenses like interest, rent, and more and cash reserves to ensure affordability.


Ideally, a mortgagor would need to have specific characteristics and qualifying factors to get good mortgage deals. Therefore, it would be worthwhile to learn how to do some of these to avoid long-term hitches. The beneficial attributes of a mortgagor include: 

  1. Good credit rating: It is standard for mortgage providers to check on a credit history before authorizing a loan in any country. A good credit rating indicates that borrowers can pay their premiums on time. Therefore, it is attractive to prospective mortgagees. Since it means a low risk of defaulting, poor credit ratings can bar one from getting good mortgage deals. Rather than getting an expensive mortgage, they could instead spend an extra year paying off their debtsDebtsDebt is the practice of borrowing a tangible item, primarily money by an individual, business, or government, from another person, financial institution, or more and putting their financial affairs to improve their credit rating.
  2. Excellent financial management: Being a mortgagor means setting aside money for periodic installments or having enough cash reserves. Otherwise, it could result in payment default, penalties, and a generally hard time paying off the mortgage when not done effectively. Of course, the worst-case scenario is foreclosureForeclosureForeclosure refers to the legal action taken by the lender when the borrower fails to repay the amount due against the mortgage loan. The lender can take the possession of mortgaged asset or property or resale it to a third party for recovering the default loan more due to the complete inability to pay the mortgage.

Frequently Asked Questions (FAQs)

Who are mortgagors and mortgagees?

The mortgagee or lender is the person or financial institution that provides a loan to another entity known as a mortgagor, borrower, or debtor. In return, the mortgagee takes property as collateral from the borrower. Also, the borrower should pay back the mortgagee following and adhere to the mortgage term like a regular mortgage installment amount during the predefined tenure.

Who is a mortgage loan originator?

A mortgage loan originator (MLO) is the entity that helps the borrower to select a suitable loan for a real estate transaction. Generally, it is the primary lender like retail banks, mortgage banks, or mortgage brokers. They assist the borrower in initiating and completing the mortgage transaction.

Is the mortgagor the owner?

The mortgagor meaning portrays them as the property owner who borrowed money by pledging the property to purchase real estate. As a result, they receive the money required to complete the real estate transaction from the mortgagee.

This has been a guide to Mortgagor and its definition. Here we explain how Mortgagors work along with its examples and characteristics. You may learn more about financing from the following articles –