Mortgagor vs. Mortgagee: What’s the Difference?

What Is a Mortgagor?

The mortgagor is the party seeking a mortgage, also known as the buyer, borrower or homeowner. If you're in the process of applying for a home loan, the mortgagor is you.

A mortgagor may be a person or multiple people—for instance, you and your spouse. In a typical loan agreement, the mortgagor is responsible for making monthly payments, paying homeowners insurance and property taxes, and maintaining the home and property. If a problem arises making payments, it's the mortgagor's responsibility to communicate with the lender and work toward a resolution.

What Is a Mortgagee?

The mortgagee is the lender offering a mortgage. Mortgagees are typically banks, credit unions or other financial institutions. They review loan applications and set the terms of the mortgage, including the mortgage amount and interest rate. The mortgagor is also responsible for servicing the loan: collecting payments, providing monthly statements and sending tax documents. Some mortgagees hire servicing companies to administrate loans on their behalf. In these cases, though, the mortgagee is still considered the lender.

Learn more: The Complete Guide on How to Get a Mortgage

Mortgagor vs. Mortgagee: Roles and Responsibilities

In a typical mortgage transaction, both mortgagors and mortgagees play central roles. Here's how those roles and responsibilities play out between borrowers and lenders:

What Rights Does the Mortgagor Have?

Mortgagors have many rights, as spelled out in their loan documents. Four key rights borrowers can keep in mind include:

1. The right of redemption: The mortgagor has the right to redeem their home by bringing a loan current before it is sold in a foreclosure.
2. The right of transfer to a third party: The mortgagor has the right to transfer the property and mortgage to a third party prior to foreclosure, subject to the terms of the mortgage contract.
3. The right to inspection and production of all documents: The mortgagor is entitled to review and obtain copies of all loan documents provided by the lender.
4. The right to make additions or improvements: The mortgagor has the right to renovate, build on or otherwise improve the property.

What Protections Does the Mortgagee Have?

Mortgagees need to protect themselves against losses from default. They do this by carefully evaluating loan applicants based on standard criteria, including:

• Credit: Mortgagees use credit scores and credit reports as indicators of an applicant's likelihood of repaying their debts on time.
• Debt-to-income ratio: Comparing an applicant's total outstanding debts to their income helps determine how much mortgage debt they afford to take on.
• Income: Mortgagees consider both the amount of income applicants make and their income history to determine loan eligibility.

Lenders typically charge late fees for payments made past an agreed-upon due date. Multiple late payments may lead to foreclosure, the process by which mortgagees may seize the mortgaged property and sell it. Foreclosure is a lengthy and costly process; mortgagees generally use it as a measure of last resort. However, foreclosure does provide some protection for lenders against default by giving them a way to recoup their funds.

Learn more: How Can I Stop Foreclosure?

How the Mortgagor and Mortgagee Work Together

The relationship between a mortgagor and mortgagee is meant to be mutually beneficial. The mortgagee provides a loan and collects interest and fees; the mortgagor receives financing that makes it possible to purchase a home and live in it while paying it off over time.

Each one plays a role in making the relationship work. The mortgagee considers the mortgagor's credit history, debts and income to set a loan amount and loan terms they can plausibly repay. From there, it's up to the mortgagor to make payments on time—and to work proactively with their lender if there is a disruption—so they can both avoid late fees and foreclosure.

The Bottom Line

If you're currently shopping for a home, you may improve your chances of securing a loan (and successfully becoming a mortgagor) by checking your FICO^® Score^☉ and credit report for free with Experian, and studying up on how much house you can really afford. When you're ready to sign, be sure to review the loan documents your mortgagee provides carefully, so you fully understand your rights and responsibilities. Happy homeowning!