# Mortgagee: Definition, What They Do, and Role in Homebuying

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## What Is a Mortgagee?

A mortgagee is a lender, specifically an entity that lends money to a borrower to purchase real estate. In a [mortgage](https://www.investopedia.com/the-best-mortgage-lenders-11714101) transaction, the lender serves as the mortgagee, and the borrower is known as the mortgagor.

### Key Takeaways

*   A mortgagee is an entity that lends money to a borrower (also known as a mortgagor) for the purpose of purchasing real estate.
*   To limit its risk, a mortgagee creates a priority legal interest in the value of the mortgaged property, allowing it to seize it if the mortgagor defaults on the loan.
*   Mortgagees structure loans using fixed or variable interest rates.
*   A mortgagee has the right to the real estate collateral associated with a loan to protect a lender against default.

## How a Mortgagee Works

Most people take out a [mortgage](https://www.investopedia.com/terms/m/mortgage.asp) to finance the purchase of a residence or commercial building. To limit its risk in the investment, the lender in the transaction creates a priority legal interest in the property's value, substantially lowering the probability that it, the mortgagee, will not be repaid in full if the borrower defaults on the loan. This is done through a [perfected lien](https://www.investopedia.com/terms/p/perfected-lien.asp) and title ownership.

A mortgagee represents the interests of the lending financial institution in a mortgage deal. Lending institutions can offer a variety of products to borrowers, representing a significant portion of loan assets for both individual [lenders](https://www.investopedia.com/the-best-mortgage-lenders-11714101) and the credit market overall.

## Mortgage Lending Products

Mortgagees can structure mortgage loans with either a fixed or variable rate of interest. Most mortgage loans follow an [amortization schedule](https://www.investopedia.com/terms/a/amortization.asp) that provides steady monthly cash flow to the lending institution in the form of installment payments until the loan is paid off at the end of its term. Standard fixed-rate installment mortgage loans are generally the most common type of mortgage loan issued by lenders. Adjustable-rate mortgage loans can also be offered as a [variable-rate](https://www.investopedia.com/terms/v/variableinterestrate.asp) mortgage product.

Lenders can also issue non-amortizing loans. However, these products are not typically [qualified mortgages](https://www.investopedia.com/terms/q/qualified-mortgage.asp) and carry much higher risk. Non-amortizing loans may have either fixed or variable rates. They are loans that defer principal cash flows for the borrower to one lump sum payment. During the duration of the loan, interest payments may or may not be required. Popular types of non-amortizing mortgage loans are balloon payment loans and [interest-only](https://www.investopedia.com/terms/i/interestonlymortgage.asp) loans.

> **Important**
>
> Mortgage loans are one of the most popular types of secured loans in the credit market.

## Protections for Mortgagees

In a mortgage loan, the mortgagee has rights to the real estate collateral associated with the loan. This provides the lender with protection against [default](https://www.investopedia.com/terms/d/default2.asp). However, certain provisions must be made for seizing collateral assets if default occurs. For this reason, mortgagees include a perfected lien and integrate title rights into a mortgage lending contract.

A lender’s legal counsel drafts a perfected lien to allow a mortgagee to easily obtain the real estate associated with a mortgage loan if the [mortgagor](https://www.investopedia.com/terms/m/mortgagor.asp) defaults. A perfected lien is a [lien](https://www.investopedia.com/terms/l/lien.asp) that has been filed and recorded with the appropriate agency, giving the mortgagee the right to obtain real estate collateral more easily. In a secured mortgage loan, the mortgagee is also the named real estate property owner on the property’s title. With the lien and property title, a mortgagee can easily obtain legal rights and institute specific procedures for vacating a property to be taken over in foreclosure.

## What Is the Difference Between a Mortgagee and a Lender?

The term "mortgagee" refers to a lender, so the terms can be used interchangeably. A borrower might also be referred to as the mortgagor.

## What Is the Role of the Mortgagee?

Since the mortgagee is the lender, its job is to provide funds for the borrower, in this case, the buyer looking for a mortgage.

## Is the Mortgagee of a Mortgage the Owner of the Property?

A mortgagee is the bank or lender that lends money to the borrower. A mortgagee is not a person who owns the property.

## The Bottom Line

A mortgagee is simply the lender or bank financing a mortgage. Mortgage loans use fixed or variable interest rates, and they usually follow an amortization schedule to provide steady payments to the lender. Protections are put into place so the mortgagee won't lose out if the borrower defaults on the loan.  

> **Article Sources**
>
> 1.  Cornell Law School: Legal Information Institute. "[Mortgage](https://www.law.cornell.edu/wex/mortgage)."
>     
> 2.  North Carolina General Assembly. "[Chapter 44A Statutory Liens and Charges](https://www.ncleg.gov/EnactedLegislation/Statutes/PDF/ByChapter/Chapter_44A.pdf)," Pages 17–22, 35.
>     
> 3.  Consumer Financial Protection Bureau. "[Understanding Loan Options](https://www.consumerfinance.gov/owning-a-home/loan-options/)."
>     
> 4.  University of California: Office of Loan Programs. "[Loan Terminology Glossary](https://www.ucop.edu/loan-programs/resources/loan-terminology-glossary.html)."
>     
> 5.  McKinsey & Company. "[Five Trends Reshaping the US Home Mortgage Industry](https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/five-trends-reshaping-the-us-home-mortgage-industry)."