New York State Real Estate Salesperson Licensing Exam

Who is referred to as the borrower in a mortgage loan?

1. Mortgagor

2. Mortgagee

3. Principal

4. Guarantor

The correct answer is: Mortgagor

In a mortgage loan, the borrower is referred to as the mortgagor. This terminology stems from the nature of the mortgage agreement itself: the mortgagor is the individual or entity that borrows money from a lender (the mortgagee) in order to purchase real property. In this arrangement, the mortgagor pledges the property as collateral for the loan, which means if they fail to repay the loan, the mortgagee has the right to take possession of the property through a foreclosure process. Understanding the roles in a mortgage agreement is crucial. The mortgagee is the lender, who provides the funds and holds the mortgage lien on the property. The principal usually refers to the original sum of money borrowed, rather than the person borrowing it. Meanwhile, a guarantor is someone who agrees to take responsibility for the loan if the borrower cannot fulfill their obligation, but they are not the primary party in the mortgage agreement itself. By recognizing that the mortgagor is the borrower, one can effectively navigate discussions around mortgage transactions, including rights, responsibilities, and potential consequences in the lending process.