The word “mortgage” is typically used to refer to a loan to buy real property. Technically, however, the document that evidences the borrowing of money is called a “Note” or a “Promissory Note”. The note outlines the terms and conditions of the loan. A “Mortgage”, on the other hand, is the document that ties the real property to the loan as collateral or security for the repayment of the loan. If the Note is not paid in accordance with the agreed upon terms, the Mortgage allows the lender to sell the real property in order to pay off the loan. Contrary to popular belief, the fact that the bank holds your mortgage does not mean that the bank “owns” your house. You own your house. The bank simply has the right to use the value in your house to pay off your obligation to them, if you fail to do so.
