Mortgagor

What is a mortgagor?

A mortgagor is a person, business, or other entity that receives a loan—specifically, a mortgage loan—that is secured against real estate.

The mortgagor is the borrower in the relationship, while the mortgagee is the lender. You’re not likely to see these terms outside of a legal contract; even most banks just use terms like “borrower” and “lender” to make things clearer.

Not everyone who takes out a loan is a mortgagor; the term only applies to those who take out mortgage loans. Credit cards, car loans, and unsecured lines of credit are all loans, but none of them are mortgages.

Mortgages are loans made specifically to buy real estate, where real estate is also the collateral for that loan. Collateral is an asset that a lender holds as security for a loan. In the case of a mortgage, that collateral is the home itself. The lender maintains an interest in that home until the mortgagor pays off the loan. If the mortgagor stops making payments, the lender has the right to repossess the house to get their investment back.

A mortgagor pays interest on their loan at a rate determined by the lender. It’s advantageous for a mortgagor to compare mortgage rates from a variety of different lenders before locking into a particular rate. Would-be mortgagors can easily compare mortgages online.

Mortgagor vs. mortgagee

Given how rarely they come up in day-to-day conversation, it can be hard to remember which is which between mortgagor and mortgagee.

The mortgagor is the one doing the mortgage, so to speak—the borrower. They’re taking out the loan, they’re making the payments, and it’s their house that’s securing the mortgage.

The mortgagee, on the other hand, is the bank (or another lender). Their role in the relationship is to provide the money for the loan (and take possession of the house if the borrower fails to hold up their end of the deal).’

Mortgagors and home insurance

Mortgagors have a number of responsibilities aside from the obvious one of “making mortgage payments on time.”

Mortgage lenders require that all the homes being mortgaged have an active home insurance policy covering them. Accordingly, the mortgagor needs to buy a home insurance policy for their mortgaged home and keep that policy active throughout the life of the mortgage (and ideally, after).

In fact, home insurance policies explicitly protect the mortgage lender in addition to the homeowner who bought the policy. The Standard Mortgage Clause in Canadian home insurance policies assures that the lender can have their stake in the house protected even if the mortgagor (the homeowner) does something that violates the terms of the policy.

After all, the mortgagor and the mortgagee have a shared interest in the mortgaged property until the mortgage is completely paid off.

The important points

• In a mortgage, the mortgagor is the party borrowing money.
• Mortgagor only refers to those taking out mortgage loans; other types of borrowers are not mortgagors.
• Mortgagee is the mortgagor’s counterpart—the party lending money.

Looking for another insurance definition? Look it up in The Insurance Glossary, home to dozens of easy-to-follow definitions for the most common insurance terms. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.