Summary
Summary - Mortgages
- Module
- Land Law
- Institution
- University Of Portsmouth (UoP)
Summarising notes on the law around mortgages in England and Wales - cases, notes and summaries
[Show more]
Seller
Follow
Content preview
MortgagesSunday, 5 December 2021 16:25
What is a mortgage?
- 'Dead pledge'
- The use of land as security for an obligation
- Normally the obligation is to pay money, often to buy the land in question
- The point is that if you don’t pay, you lose the land
Why a mortgage?
- Land is very effective as a kind of security
- Effective way of turning assets into cash
- Also could be a type of investment
Mortgagor - borrower (usually also the buyer of the property)
Mortgagee - lender (normally a bank or building society)
Security - forfeit if the obligation is not fulfilled (normally the land)
Charge - standard modern form of mortgage
Pledge - old word for security
Common uses of mortgages
- Buying expensive things
○ Houses, shops, factories, ships, machinery etc
- Secure form of investment
○ Guarantees payments
Common issues
- How to balance the different rights and interests?
- What if the land loses value?
- How can the lender protect their interests?
- What can the borrower do if the lender does things to protect their interests?
- Are there any limits to the terms the lender can impose?
Role of equity
- Mortgage at common law = strictly follow the terms or lose
○ If there is a small slip you could lose your land
- Equity of redemption - rebalances the position between borrower and lender
Formalities
- A legal mortgage
○ Use a deed (s 52 LPA 1925)
○ Register it (s 27 LRA 2002)
○ It is equitable until registered
- An equitable mortgage
○ Don’t - legal is better
○ Could be a result of forgery or formalities failure
○ Equitable interests can only have equitable mortgages
Types
- Instalment/repayment mortgage
○ Traditionally a 25 year term for a house
○ Monthly payments to repay the amount borrows
○ Plus interest
○ After 25 years, the mortgage is repaid
- Endowment /interest only mortgage
Monthly payments made to cover the interest on the loan
Land Law Page 1
, ○ Monthly payments made to cover the interest on the loan
○ Other investments will hopefully repay the mortgage
- Overdraft mortgage
- 'Islamic mortgage'
Equity in the property
- Mortgage debt is actually a £sum - capital plus interest
- Customary to analyse land in fractions or percentages
- For example - if the house is 250k and we have paid off 100k, we equitably own 40% of the
property
Negative equity
- Usually house prices increase over time
- Mortgage debt becomes a smaller proportion even faster
- House prices could also fall
- Mortgage debt will become a larger proportion
○ For example, house is 250k
○ Have a 225k mortgage loan
○ Your house is now only worth 200k
○ So you owe the bank more than your house is worth
○ This is negative equity
Equity of redemption
- Lenders tend to create ever more elaborate mortgages with more and more fringe benefits
(makes a mortgage more like a conveyance)
- Equity looks to the substance not the form - once a mortgage, always a mortgage
- Equity insists that the borrower is the true owner and they have a right to redeem
- Equity of redemption is all of the borrowers rights that are left
Loan to value ratio
- House for 200k
- Sold the house for 180k
- If you had a 100% mortgage then you would owe the bank 20k
- If you had a 60% mortgage then you would be able to keep 60k
- If you had a 90% mortgage then you would owe all your sale proceeds to the bank
Legal date to redeem
- Lender sets a legal date that they want the loan to be repaid by, with a view to foreclosing if
not
- Equity says once a mortgage always a mortgage
- Could allow borrower to pay up very late
- So the lender sets the legal date very early - sometimes after a month or two which is clearly
unrealistic
- When will equity allow redemption?
Limits on borrower sale / lease
- Lender is likely to want a veto on these - only with the lenders consent
- Court can override the sale - s 91 LPA
Variable interest rates
- May start as fixed but can vary
LPA implied terms re sale
- Includes default terms
- Sale ss 101 ff is especially important
Possession and sale by lender
- Lenders will often include their own terms about possession
Land Law Page 2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller charlie01jones. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £5.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
56326 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now