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Bank Mortgages

Bank mortgages differ from building society mortgages. Although the differences are diminishing. This law-byte picks out some major differences. There is no substitute for reading the charge in full and asking any questions you may have.

Bank mortgages secure all money from time to time owing to the bank. These words are precise, and include any accounts held with the lender, for example overdrawn current accounts, or accounts at a different branch, or perhaps money due under a guarantee supporting business borrowings. Building Society loans usually secure just one debt. The bank will usually ask for all the proceeds of sale to be paid to them on a sale, and to avoid delay you should agree something with your bank.

You may not borrow against any remaining equity after the bank's charge. If you used your house as security for a loan with another company, the bank will receive notice of this. The bank may then open a new account for you, and any payment made by you can be transferred into the newly opened account. This means that the payments are not used to reduce your liability under the loan.

If you have more than one account with the bank and you receive notice demanding payment of the sums due, or if the bank receives notice of any subsequent loan which affects the property, the bank may transfer any part of the balance in any account to the account which may be in debit. The bank will notify you of such transfer having been made.

Where two or more people take out a mortgage with a bank each of them is responsible for the act or default of each of the others. If one takes out a large loan at another branch of the bank, and defaults, then the bank may look to the other part to the mortgage deed to pay off this debt also.

As with all charges, you agree to indemnify the bank against all and any costs and expenses. Thus if you fall out with them, and win costs against them in court, you may find the costs are merely added back to the debt.

The charge will be a continuing security. This means that it will continue in effect even if the borrowings are repaid. It may even continue if the loan proves invalid in some way.

You must not let the property without the bank's consent.

You may not make any claim against the borrower in competition with the bank.

Particular care must be taken where a house is charged to secure the borrowings of a third party (or just one of co-owners). There should be (but rarely is) a formal and very clear understanding as to the arrangements between the owner and the borrower covering indemnities, limits on the borrowings, information about the account secured, and promises about future borrowings. A person charging a property in this way, to secure somebody else's debts, should normally take advice which is independent both of the bank and of the borrower. It is a very substantial trust to place in another person.

Important: Please note that our law-bytes are retained for archival purposes only. The law changes, and these notes are often, now, out of date. You must take direct advice on your own personal situation and the law as it currently stands.
All information on this site is in general and summary form only. The content of any page on this site may be out of date and or incomplete, and you should not not rely directly upon it. Take direct professional legal advice which reflects your own particular situation.
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18 October 2013 http://www.swarb.co.uk/lawb/cvrBankMort.shtml 5 18 October 2013