9 - Mortgages Flashcards
What is a mortgage?
The right of a lender over land guaranteeing repayment of debt or enforcement of an obligation
What are the three types of mortgage?
Repayment, endowment, pension
How does a repayment mortgage work?
Monthly repayment to lender, repayment is borrowed capital plus interest. Usually repaid monthly for 20-25 years. Mortgagor sometimes required to take out life insurance to cover death before repayment.
How does an endowment mortgage work?
Only interest is paid by monthly instalments. Mortgagor takes out an endowment policy with an insurance company which is repaid monthly, and the premiums repaid are invested by the insurance company and used to pay the capital loan at the end of the policy. If proceeds insufficient, policy holder may have to pay difference. If mortgagor dies, policy matures and is repaid early.
How does a pension mortgage work?
Links the mortgage with pension arrangements. Beneficial for self employed people and/or high earners.
What is the legal date for redemption?
The date provided in the mortgage that the full loan must be repaid (usually 6 months after creation). Once this date has passed, the mortgagees remedies arise and the mortgagor has equitable right to redeem (equity of redemption)
What is a “clog on equity of redemption”? Give a case law example
Attempts to prevent the mortgagor from exercising right to redeem - Fairclough v Swan Brewery Co Ltd
What are the 6 remedies of the mortgagee if the mortgagor defaults?
1 - obtaining possession 2 - sale 3 - action in debt 4 - appointment of a receiver 5 - foreclosure 6 - liability of guarantors
What are the rules of obtaining possession?
Only lawful if the mortgagee has a court order for possession. The court can stay, suspend or adjourn proceedings if it thinks the mortgagor can pay in time.
What are the rules of the remedy of sale?
The mortgagee may sell the property once they’ve taken possession under statutory power implied into all mortgage deeds. Power arises under s101 LPA if mortgage made by deed and contractual date to redeem has passed and there is no contrary intention in deed. Mortgagee has duty to take reasonable care and get best price for sale.
In what three circumstances can power of sale be exercised under s103 LPA 1925?
1 - interest payments are 2 months in arrears
2 - 3 months since notice requiring payment served
3 - breach of another mortgage term
What is liability of guarantors?
A guarantor guarantee’s someone’s liability to make mortgage payments. Guarantor’s name will not appear on the Land Registry title but they are jointly and severally liable for the debt. Therefore, if the mortgagor fails to pay the loan, the mortgagee can take action against the guarantor. Once loan is fully repaid, guarantor is released from the agreement
How are legal and equitable mortgages protected on registered land?
legal - as charge on charges register
equitable - by notice on charges register
