Not everyone is familiar with real estate and mortgage terminology. One common question is about the difference between "mortgagor" and "mortgagee." While they look and sound familiar, there are some key differences that depend on who holds the mortgage and who provides it. This article explains what they mean to help you navigate the homebuying process with confidence.

What Is a Mortgagor?

A mortgagor is the borrower (person or entity) who takes out a mortgage to buy a house. It can be one person, several people, a business, or a real estate trust. The borrower remains the mortgagor until the loan is fully repaid.

Key Responsibilities of the Mortgagor

The mortgagor has specific responsibilities they must adhere to, including:

• Repaying the loan: They must repay the loan based on the terms and conditions of the mortgage.
• Maintaining the property: They'll need to keep the home in good condition (to protect its value as collateral until the mortgage is paid off).
• Paying property taxes: They're responsible for paying property taxes (directly or through escrow).
• Following the mortgage terms: They must comply with all mortgage terms, such as not taking out additional liens on the property without notifying the first lienholder.
• Homeowners insurance: Most mortgages require the mortgagor to carry homeowners insurance to protect against property damage or loss. You'll find the insurance requirements in the mortgagee clause of the mortgage terms.

What Is a Mortgagee?

The mortgagee is the lender who funds the mortgage. Mortgagees are typically banks or non-bank mortgage lenders (but can also be a person). The mortgagee has a legal claim to the property as collateral until the loan is fully repaid.

Key Responsibilities of the Mortgagee

The mortgagee also has key responsibilities:

• Ensuring compliance: They must follow all applicable lending laws and regulations.
• Collecting payments: They'll collect payments as set in the loan terms.
• Managing the escrow account: They're also responsible for paying property taxes and insurance on time from an escrow account.
• Appraisal: The mortgagee will order an appraisal conducted by an independent, licensed appraiser.
• Initiating default: If the borrower doesn't make payments, the lender may start foreclosure and must secure the property at the end of foreclosure.

The mortgagee is the first lienholder, holding the first legal claim on a property that is in default.

Side-by-Side Summary of Mortgagor vs. Mortgagee

This table summarizes the main differences between a mortgagor and mortgagee.

Mortgagor and Mortgagee Partnership

The mortgagor and mortgagee work together for mutual benefit. Remember, the mortgagee lends money to help the mortgagor buy a home, and the mortgagor owns, lives in, and maintains the home. The mortgagee earns interest as the mortgagor repays the loan. As payments are made, the mortgagor builds equity and eventually takes full ownership.

Final Thoughts: Mortgagor and Mortgagee Meaning

You'll remember the definitions of mortgagor and mortgagee with one simple trick. If it ends in -or, it means the borrower, and if it ends in -ee, it means the lender. In the end, the process has one purpose, to get you the keys to your new home. Now that you speak the language, if you're ready to take the next step to get a home or refinance, get prequalified for a mortgage today.