A mortgage deed: what is it? Why is it important?

A mortgage must be secured against your asset, which in these circumstances is usually the property that you are looking to purchase. 

What is a mortgage deed?

The mortgage deed is the document that states that you and the lender have agreed to use the property as a security to protect the mortgage.

The deed contains information on the conditions of the mortgage, repayment schedule, length of the mortgage, mortgage rates, type of mortgage and security for the mortgage. 

As a borrower, you have to understand the terms and conditions thoroughly. 

At SO Legal, we provide you with our mortgage report, highlighting the key elements of the mortgage offer and conditions. The terms are legally binding and can be enforced by law if you fail to pay the mortgage during the repayment period.

Why is this required?

When the mortgage offer is provided to you by the lender, they ensure that the terms of the offer are suitable for you to comply with the conditions without any issues. 

You would be expected to repay the mortgage within a certain time period, which varies with each offer and the loan amount, interest rate and repayment frequency varies as well. The long duration of mortgage repayment allows the buy to repay comfortably without going through a tough financial crisis.

However, just the presence of a property is not enough for the lender to satisfy that you will repay the loan that was provided initially. Even though the mortgage offer is issued after much scrutiny of your financial stability and credit ratings, this is not enough to guarantee lenders that their money will be repaid in time. 

Mortgage deed and trust deeds, however, are the only way that the lenders can rely on to recover the money lent to you as the borrower, as it is a legally binding contract.

Failure to comply with the mortgage deed

Most of the high street lenders include a clause in the mortgage deeds which allow them to foreclose the property after the borrower defaults in the repayments after a certain period. 

Foreclosure of the property will mean that the lender will sell the property to pay off the debts owed by the borrower. 

There are circumstances where the borrower can negotiate with the lender to come to a different arrangement for a new repayment method rather than the foreclosure of the property.