Mortgage - Legal Definition
A Mortgage can most broadly be defined as the transfer of title to real property to a grantee, the purpose of which is to take security against the performance of a specified action, usually the payment or re-payment of money by a person or entity which is making the transfer, the grantor. Once the specified action has been performed in full, such as in the completion of all payment (payoff), grantee shall then convey title to the property back to the grantor.
More specifically, a legal mortgage of real property, particularly land and homes, can be described as the conveyance of the real property from debtor (grantor is now mortgagor) to creditor (grantee is now mortgagee), as security against the repayment of money borrowed by the debtor from the creditor.
A legal mortgage must be in writing if it has been written with the intent of conveyance of legal title to real property. Typically, such a mortgage is contained in a single deed containing the entirety of the agreement and contract between the parties.
In practice, mortgages in the United States may be Mortgage Liens or Deeds of Trust, however either instrument will provide the mortgagee with a lien against the real property being mortgaged. A Lien is a recorded claim made by a creditor against a specific piece of a debtors real property, or collateral. Such collateral secures payment in the event of default. Liens may be lodged against real property by any creditor, and multiple liens will be subject to a concept called seniority, wherein the first mortgage lien on a property takes precedence over the second mortgage lien and so on and so forth. Should the first mortgage be paid off and the first lien position be released, the second mortgage lien would now move up in seniority and become the first lien as the next oldest lien of record.
An important note with regard to refinancing a property with existing liens is that a first mortgage and a second mortgage taken out to purchase a home will occupy first mortgage lien position and second mortgage lien position against the property, respectively. Should the debtor wish to refinance the first mortgage only, the mechanism by which mortgages are refinanced requires that the first mortgage be paid off, resulting in release of the first mortgage lien. Upon payoff of the existing first mortgage and release of the lien, the existing second mortgage would take priority, or first lien position by virtue of its seniority to any new debt being secured against the property through a mortgage refinance. So to refinance a mortgage in the 1st position and keep the existing second mortgage, the second mortgagee must agree to subordinate or re-subordinate his lien to remain in the second position and allow a new 1st mortgage to occupy the first lien position.
