Simple Mortgage Definition
A simple mortgage is a type of mortgage where the borrower, also known as the mortgagee, grants a security interest in a specific property to the lender, known as the mortgagor. This security interest acts as collateral for the loan and provide assurance to lender that the borrower can repay their funds if they default for repayments or incase borrower is unable to repay the loan then mortgaged property can be used to make good of the loan by mortgagee. The mortgagee retains possession of the property as long as the mortgage is in effect.
Simple Mortgage Essential
Mortgage Deed
Mortgage deed, a legal document or agreement that contains the terms and conditions of the mortgage agreement between mortgagee and mortgagor. The deed contains details about the property, loan amount, interest rate, repayment terms and other important provisions. Both parties sign this document to formalize the arrangement.
Transfer of Interest
The mortgagor transfers a specific interest in the immovable property to the mortgagee. This interest serves as security for the loan paid to borrower and gives the mortgagor the right to take legal action in case of default. After the completion of the mortgage, the interest of the mortgagor reduces to that proportion that has been mortgaged to the mortgagee.
Repayment Terms
The transaction that is involved in the simple mortgage is for the payment of loan or performance of obligation. Payment terms, including the loan term and frequency of payments, are key components of a simple mortgage. These terms are mutually agreed between the borrower and the lender and are legally binding between both parties.
Default Provisions
A simple mortgage agreement usually includes details of actions that can be taken in case the borrower is unable to repay the amount borrowed. This can include the legal process by which the mortgagor can sell the property to recover the outstanding debt.
Rights of Mortgagor
Right to Possession
One of the main rights in a simple mortgage is the right of possession of the property to the lender or mortgagor. Unlike other types of mortgages, the mortgagee continues to occupy and use the property during the term of the mortgage.
Right to Redemption
The mortgagor has also the right of redemption. This gives the borrower the option to repay the loan and reclaim the property given as collateral to simple mortgage. This right is available to the mortgagor until the mortgage debt is fully satisfied.
Right to Receive Payments
The mortgagor has the right to receive regular payments from the mortgagor as per the agreed terms. This right ensures that the lender receives the loan amount with interest within the stipulated period.
Rights of Mortgagee
Right to Surplus Amount
The mortgagee has also the right to claim the excess amount if the amount is more than the outstanding mortgage debt. This ensures that the mortgagor does not miss out on any additional funds generated from the sale of the property.
Right to Inspect the Property
To protect his interests, the mortgagee has the right to inspect the mortgaged property. It is to ensure that the property remains in good condition and is being used properly.
Conclusion
A simple mortgage is an important financial instrument that enables individuals to access collateral property as a cushion in case the mortgagee is unable to meet the repayment terms and conditions. As with any legal agreement, seeking professional advice and thoroughly reviewing the terms of the mortgage deed can help ensure a safe and mutually beneficial arrangement for all parties involved.
