Mortgage deed

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Mortgage deed "is a legal document that gives the lender an interest in a property when you take out a loan backed by the property. Some states use documents called mortgage deeds, and some use an alternate form called a deed of trust, while still others allow both. If a borrower doesn't pay back a loan in accordance with the agreement, the lender can foreclose and take possession of the land or have it auctioned off." [1].

In other sources we can find explanation that mortgage deed is a proof - a document - of interest transfer to the mortgage holder. This document is a legally binding agreement in which both sites agree that property becomes additional collateral. In situation when people decide to buy a home and they are forced to take a loan they need to sign a document that allows the lender to put a lien on the property until the loan will be paid in full.

Most often, a mortgage deed is arranged that officially secure the mortgage loan. The Business Dictionary indicates, that a mortgage deed is "type of mortgage in which a borrower transfers (conveys) his or her right to the ownership (title) in a property to a lender as security for a loan. Also called deed of mortgage or deed given to secure a debt." [2]

It is the document, normally filled at a local government office, and its content varies in different states based on local law. It means that a mortgage deed is considered as legally binding document. As the example of a mortgage deed, the property selling process can be given. If a building is intended to be sold out, the future owner, or other related entity like e.g. an insurance company, should verify the status of deed on the property. The verification is crucial to be organized before the transfer of the right to a property to another person or legal unit.

Describing the formal structure of the document, it is formed in a short way, up to two pages record. The standard stakeholders are a purchaser of the property and the financial entity that releases the loan. Candace Webb ascertains such important conditions for validating the mortgage deed [3].

  • "What it does is confirm by the signature of the purchaser(s) that they are accepting the terms of the mortgage, agreeing to pay the loan back as outlined and that they agree with the mortgage company's offer to fund the loan."
  • "Someone must witness the signing of the mortgage deed."

Examples of Mortgage deed

  • A mortgage deed is a document that is used to secure a loan and transfer a property's title from the seller to the lender. When a borrower takes out a loan, the lender holds the title of the property until the loan is fully paid off. To do this, the borrower signs a mortgage deed in which they agree to pay back the loan and give the lender a lien on the property. If the borrower defaults on the loan, the lender can foreclose and take possession of the property.
  • Another example of a mortgage deed is when a borrower takes out a reverse mortgage. In this case, the lender pays the borrower a lump sum or a series of payments in exchange for a lien on the property. The borrower continues to own the property, but the lender can foreclose if the borrower fails to make payments or abides by the terms of the agreement.
  • Finally, a mortgage deed can also be used when a homeowner takes out a home equity loan or line of credit. In this case, the borrower agrees to pay back the loan in full and give the lender a lien on the property. If the borrower fails to make payments, the lender can foreclose and take possession of the property.

Advantages of Mortgage deed

Mortgage deeds have many advantages, including:

  • Protecting the lender's interest in the property: By signing a mortgage deed, the lender is granted an interest in the property, meaning that if the borrower does not pay back the loan, the lender can take possession of the land or have it auctioned off.
  • Low cost: Mortgage deeds generally have lower costs than other types of financing which is beneficial for both the lender and the borrower.
  • Flexibility: Mortgage deeds often allow for more flexibility when it comes to loan terms, including allowing for different payment structures and interest rates.
  • Security: Mortgage deeds provide the lender with a secure way to loan money and protect their investments.

Limitations of Mortgage deed

A mortgage deed is a legally binding document that grants lenders a legal interest in the property when a loan is taken out against it. However, there are a few limitations to be aware of:

  • It does not protect a borrower if they fail to pay back the loan as agreed. In this case, the lender can foreclose and take possession of the land or have it auctioned off.
  • The mortgage deed is not transferable, meaning the borrower cannot transfer their loan to another individual.
  • The deed does not guarantee any rights to the borrower, such as the right to use the property for specific purposes or to make changes to the property.
  • The mortgage deed does not provide any protection for the borrower from creditors or other third parties, such as the government or local authorities.
  • The mortgage deed does not protect the borrower from any additional costs or expenses associated with the loan, such as servicing fees or late payments.

Other approaches related to Mortgage deed

A mortgage deed is a legal document that gives the lender an interest in a property when a loan is taken out that is backed by the property. Other approaches related to mortgage deeds include:

  • A deed of trust, which is an alternate form of a mortgage deed used in some states. This type of deed gives the lender a legal interest in the property, but it is not as in depth as a mortgage deed.
  • A lien, which is a document that is filed with the local government that puts a claim on a property. This type of document is normally used if a borrower defaults on a loan, as it gives the lender the right to foreclose on the property.
  • A promissory note, which is a document that outlines the terms of the loan and states that the borrower will pay back the loan in full. This document is often used in conjunction with other types of documents, including mortgage deeds.

In summary, a mortgage deed is a legal document that gives the lender an interest in a property when a loan is taken out that is backed by the property. Other approaches related to mortgage deeds include deeds of trust, liens, and promissory notes.

Footnotes

  1. ↑ Steven Melendez, Monthly Mortgage Payments, (2019) "What is a Mortgage Deed?"
  2. ↑ Business Dictionary.
  3. ↑ Candace Webb, Buying and Selling, (2019) "Definition of a Mortgage Deed"


Mortgage deed — recommended articles
Absolute assignment — Bankers lien — Lien theory — Collateral assignment — Clear title — Assignment of insurance — Fixed and floating charge — Deed of Release — Confession Of Judgment

References

Author: Anna Droczak

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