The idea of borrowing money to purchase a property is not a new one. Few people can afford to purchase a property without taking out a mortgage. Today, mortgages are a part of everyday life. You may not be aware that the history of the mortgage goes back a very long time. The first recorded mortgage was in 1190 in England. People have used this method of acquiring property ever since.

The “Dead Pledge”
The word mortgage is a French word. It originated from the blending of two Latin words. “Mori” is the Latin word for death and the old French word for death is mort. “Gage” is a Latin word meaning to pledge to forfeit something you value if you cannot repay a debt. The translation of the word mortgage is a “dead pledge”.

It is easy to understand the meaning of the word mortgage, as the implications of having a mortgage exist as much today as they did in 1190. The English Jurist, Sir Edward Coke (1552 - 1664) explained, if you cannot repay your mortgage, you will forfeit your property. This means your property is now “dead” to you. Alternatively, once you have repaid your mortgage in full, the mortgage ceases to exist and the “pledge” is now “dead”.

Protection under Law
Common English law protected the lender of money by giving the lender a financial interest in the borrower’s property. If you take out a mortgage today, the same rules apply, however the law now protects the borrower as well as the lender. The reason for taking out a mortgage is the same today as it was in Anglo Saxon England. Taking out a mortgage enables you to pay for your property over time.

You may consider your mortgage as a debt; however, it is not really a debt. A mortgage is the lender’s security for a debt. This is an important distinction because different laws govern the repayment of debts and the paying of your mortgage.

Spend your Money Wisely
“Moneta” is the Latin word for money. Perhaps people always knew there could be problems with the earning and the spending of money because the English translation of the Latin word for money is “warning”. The first mortgages did not provide much protection to the borrower, so it was wise to remember the meaning of the word “money” before you obtained a mortgage.

By the early 1900s, mortgages were readily available for a growing population of property owners. Mortgages did not provide the borrower with as many choices and options as they do now. For example, in the 1900s a buyer might borrow 50% of the money required to purchase his property. The mortgage would be for a five-year period and only the interest paid over that time. At the end of the five years, the buyer would be required to pay the 50% still owing on the loan, or refinance. This type of mortgage would have put the possibility of purchasing property out of the reach of the average wage earner.

Today, mortgages are easy to obtain and most mortgages can be adapted to suit any changes in your financial situation. Taking out a mortgage is the best way of paying for a new property. The “dead pledge,” continues to adapt to the modern business world and it is likely you will always have the opportunity to purchase property by taking out a mortgage.