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Mortgage Terms

Most mortgages will include several standard terms. This note describes some of the most usual. This note cannot attempt to replace your reading the loan documentation entirely and properly, and asking any questions you have. We can only raise some points.

First some basics:

The arrangement is, in essence in two parts. The first is that you borrow the money. The second is that you give the property as security for the loan. It is easy to forget these and to run the ideas together. It is always a mistake.

The mortgage is intended to ensure that if you do not repay the loan as agreed, you can be evicted from the house (but only after court proceedings), and the house can be sold to recover the loan and any interest and costs. If the house does not sell for enough to repay the mortgage, then you still owe the remainder of the debt because you have not repaid it.

Here are some further common clauses in mortgages:

  1. All Monies Here the mortgage secures not just the amount you now borrow, but, and in addition, any other sum which any person signing the mortgage comes to owe to the lender in whatever manner, at whatever time, and at whatever branch, and with or without the other party's knowledge or consent. It is vital to recognise just how wide this potential liability can reach.
  2. Indemnity. The mortgagee agrees to indemnify the lender. Whatever it costs the lender to manage the account, the borrower agrees to foot the bill. For example, you may fall out with the lender, and end up in court in a dispute. You win, the court awards you your costs, the lender pays up, and away you go. On your next statement will be the costs paid to you, and the costs of unsuccessfully defending your claim. Of course, it might take a lender with some courage to make such a charge, but there is no rule against it.
  3. Penalty You agree to take a loan out over a specific period. The lender has the right to expect you to pay it back over that period. If you repay earlier then he loses his profit. Many loan agreements will punish you for such early repayments. Be sure that you know the terms of your loan exactly.
  4. Assignment. You may borrow the money from Cuddly Loans Ltd, and he may assign your debt to Razor-Teeth Sharks Ltd. On the other hand, lenders often require you to limit your power to sell the house without their consent. Loans from banks will usually, in addition, add a requirement that you can only use the remaining equity in your property for a loan from somebody else with their consent.
  5. Appointment as attorney. In the mortgage you appoint the lender as your attorney to sign any necessary documentation.
  6. The mortgage may not itself set out all the terms. Usually there will be, in addition, the Rules (if the lender is a building society), and a set of standard mortgage conditions. It is vital that you have these documents, and raise any queries with us before going any further.

In all cases, it is necessary for you to ensure that any other adult who occupies or will occupy the property with you, is made known to the lender and to us, and that any such person signs an appropriate release, or is positively excused from signing such a document.

This list is not complete. You must read your own mortgage document.

Last, please remember that each mortgage is different. Your mortgage may not contain all of these clauses, and will contain others. Your mortgage deed will often not set out the terms in full, but instead refer to a set of rules or other terms. If so, then you should have been given a booklet setting them out. If you have not received that booklet let us know.

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 126 18 October 2013