What did we do before mortgages? Buying a house is always the biggest purchase you will make, unless of course you are Richard Branson who buys whole islands! I cannot imagine having to save upwards of £150,000 to buy a property outright, unless I had won the lottery, I guess we would have to start work at a much earlier age to be able to do that.
For most people obtaining a first mortgage is the only way that they can realise the dream of buying real property and providing a secure future for their family.
Borrowing to buy a house and then using that house as security has been common for many years, the borrow gets their house early and the lender is safe in the knowledge that if the repayments are not made, they can repossess the house and get their capital back.
The word mortgage comes from an archaic language from Norman times and means ‘dead pledge’ which literally means that the pledge of security will die when the debt has been repaid or the security handed over.
The modus operandi of giving land as security for loans has been in practice for many hundreds of years, in fact it is believed to have been used since the 11th Century. In these times the lender was the absolute owner, no process was in place to make sure that the land could produce enough to repay and in fact the borrower was under no obligation to accept repayment.
This of course was hard to administer as the borrower who was also the owner had none of the rights that owners do, for example occupation but could also sell the land from under the borrower with the borrow having no right to recourse.
After centuries of this causing havoc up and down the land, the way that mortgages were administered was bought about so that the borrow still retained the right of ownership but some rights were limited. Although this has been in place since around the 17th century, it was the Law of Property Act in 1925 that properly protected both parties under statute law.