📍
Mortgages
📍 Mortgage — Basic Definition: A mortgage is a very large loan for a property,
which is typically taken over a term of 20 to 25 years.
NB If the borrower defaults in their payments, the mortgagee will have a range of
remedies available to them. These will include selling the property to pay back the
money loaned.
For this reason, a mortgage can usually be offered at a relatively low rate of interest, so
the arrangement is obviously beneficial for the borrower as well as the lender.
Terminology
The “mortgagee” — The lender who will take a charge over your property in order to
‘secure’ the loan.
The “mortgagor” — The borrower who makes payments to the mortgagee.
Creation of Legal Mortgages
📍 Legal Definition: A mortgage is a loan for a property, and is one of the five
interests capable of existing as a legal interest in land (Law of Property Act 1925,
s 1(2)). It gives the lender a third party interest in the property.
A legal mortgage is one of five interests that can exist as a legal interest in land (LPA
1925, s 1(2)(c)).
Two requirements for creating a legal mortgage:
Must be created by deed (LPA 1925, s 52(1))
Mortgages 1
, Must follow one of two methods under s 85 LPA 1925:
1. Use the form of a demise (lease) for term of years absolute subject to a
provision for the lease to end on redemption of the mortgage (rarely used).
2. Use a charge by deed expressed to be by way of legal mortgage (or a legal
charge).
a. The legal charge must be made in the form of a deed and state that the
charge is made by way of legal mortgage.
b. This form of legal mortgage does not convey any estate in land to the lender
and is the most popular method of creating a mortgage. (most common
method)
Important: Since LRA 2002 (from 13 October 2003), mortgages over registered land
can only be created by charge by deed.
Legal Mortgage of a Leasehold Estate
Two methods to create mortgage over leasehold estate (LPA 1925, s 86(1)):
1. Creation of a charge
2. Creation of sub-lease (term = original lease minus one day)
Key Point: Since 13 October 2003, registered leasehold estates can ONLY be mortgaged
by way of charge (LRA 2002).
Unregistered Titles
First legal mortgage of unregistered title:
Lenders have right to take custody of title deeds (LPA 1925, s 85(1))
Triggers compulsory first registration if created after March 1998
Registered Titles
Registration Requirements:
Mortgages over registered title MUST be registered at Land Registry.
Legal basis: Registrable disposition under s27 LRA 2002
Key point: Only becomes legal mortgage when entered in charges register
Remedies Available to a Legal Mortgagee
Mortgages 2
Mortgages
📍 Mortgage — Basic Definition: A mortgage is a very large loan for a property,
which is typically taken over a term of 20 to 25 years.
NB If the borrower defaults in their payments, the mortgagee will have a range of
remedies available to them. These will include selling the property to pay back the
money loaned.
For this reason, a mortgage can usually be offered at a relatively low rate of interest, so
the arrangement is obviously beneficial for the borrower as well as the lender.
Terminology
The “mortgagee” — The lender who will take a charge over your property in order to
‘secure’ the loan.
The “mortgagor” — The borrower who makes payments to the mortgagee.
Creation of Legal Mortgages
📍 Legal Definition: A mortgage is a loan for a property, and is one of the five
interests capable of existing as a legal interest in land (Law of Property Act 1925,
s 1(2)). It gives the lender a third party interest in the property.
A legal mortgage is one of five interests that can exist as a legal interest in land (LPA
1925, s 1(2)(c)).
Two requirements for creating a legal mortgage:
Must be created by deed (LPA 1925, s 52(1))
Mortgages 1
, Must follow one of two methods under s 85 LPA 1925:
1. Use the form of a demise (lease) for term of years absolute subject to a
provision for the lease to end on redemption of the mortgage (rarely used).
2. Use a charge by deed expressed to be by way of legal mortgage (or a legal
charge).
a. The legal charge must be made in the form of a deed and state that the
charge is made by way of legal mortgage.
b. This form of legal mortgage does not convey any estate in land to the lender
and is the most popular method of creating a mortgage. (most common
method)
Important: Since LRA 2002 (from 13 October 2003), mortgages over registered land
can only be created by charge by deed.
Legal Mortgage of a Leasehold Estate
Two methods to create mortgage over leasehold estate (LPA 1925, s 86(1)):
1. Creation of a charge
2. Creation of sub-lease (term = original lease minus one day)
Key Point: Since 13 October 2003, registered leasehold estates can ONLY be mortgaged
by way of charge (LRA 2002).
Unregistered Titles
First legal mortgage of unregistered title:
Lenders have right to take custody of title deeds (LPA 1925, s 85(1))
Triggers compulsory first registration if created after March 1998
Registered Titles
Registration Requirements:
Mortgages over registered title MUST be registered at Land Registry.
Legal basis: Registrable disposition under s27 LRA 2002
Key point: Only becomes legal mortgage when entered in charges register
Remedies Available to a Legal Mortgagee
Mortgages 2
