Mortgages
A mortgage is a system of securing a debt against a property so that the money advanced by the creditor or lender is secured against bad debts. The term mortgage stems from the French word pledge which means more or less the same thing but the term mortgage is also used to refer to the money secured by the loan. Mortgages are normally associated with real estate and allow borrowers the option of borrowing money and also afford security against losses and bad debts to the creditor. In case of failure on part of the borrower the mortgaged property is transferred to the creditor who now acquires rights over it. A mortgage may switch hands in the following ways:
A mortgage by demise is a mortgage where the property immediately passes to the creditor and becomes the owner of the property until the debtor pays off the loan. The property is conveyed to the creditor with a stipulation that it shall be returned to the owner on redemption of the loan. This is an older form of mortgage and is now very rarely used.
Mortgage by legal charge is the type of mortgage that is usually followed and in this type of mortgage the owner of the property retains the title to the property but the creditor has sufficient rights to take possession of the property or sell it in case the loan is not redeemed. To safeguard the rights of the lender the details of such a mortgage are recorded in a public register and usually before entering into a mortgage with a debtor runs a check on the land to ensure that there is no pre-existing charge on the land which may have higher priority for the debtor.
Another type of mortgage by legal charge is equitable mortgage where the creditor takes possession of the title certificates of the property and the borrower signs a Memorandum of Deposit of Title Deed (MoDTD). Here the rights of the creditor are protected and the debtor agrees that the title deed has been deposited with the bank in order to secure the borrowing.
