Most people know what a mortgage is, due to the fact that many people have one. But, do you know how the mortgage itself came about? Here is some basic history on the mortgage and where it came from:
In the beginning, a mortgage was just a conveyance of land for a fee. The buyer paid the seller a set rate, with no interest, and the seller would sign over the land to the buyer. There were usually conditions that had to be met before the land would be the property of the buyer, just like today, but usually it was based upon the assumption that the land would produce the money to pay back the seller. So, a mortgage was written due to this fact, and the mortgage stayed in effect no matter if the land produced or not.
But this old arrangement was very lopsided in that the seller of the property, or the lender who was holding the deed to the land, had absolute power over it and could do whatever they liked, which included selling it, not allowing payment, refusing payoff, and other issues which caused major problems for the buyer, who held no ground at all. With time, and blatant abuse of the mortgage system, the courts began to uphold more of the buyer’s rights so that they had more to stand on when it came to owning their land. Eventually, they were allowed to demand the deed be free and clear upon the payoff of the property. There were still steps taken to ensure that the seller still had enough rights to keep their interest safe and make sure that their money was paid.
In the U.S., some states have created their own version of the mortgage, which is why they are referred to as “lien states”. In England and Wales, the Law of Property Act of 1925 created a close parallel to the U.S.’s stance on mortgages. In 1934, mortgages began to be widely used again in the U.S., and the Federal Housing Administration helped to lower the down payments on homes to make it easier for buyers to purchase a home. During that time, around 40% of people in the United Sates owned homes. Now, that number is closer to 70%, due to the lower interest rates.
Although mortgages today have evolved into many different forms, they are still basically the same essential contract that they were in the beginning. Now, there are many more laws and regulations to help protect the buyer, seller, and creditor. There are also many different ways to lock in a low interest rate, you just need to talk to your mortgage broker about what the rates are now and what kinds of programs they offer to keep those interest rates low throughout the life of your loan.