What is a mortgage?
A mortgage is a (secured) loan to finance the purchase of your home that is secured by the property you are going to purchase. Put another way, if a purchaser of a property does not have the necessary funds to complete the purchase and needs financial assistance from a lender (in most cases a bank), the lender will require a security for the monies loaned in the form of a mortgage over the borrower’s (also known as the mortgagor’s), property which serves as the collateral for the monies loaned. Thus, while the borrower will be the registered owner of the property, it is the mortgagee that is the actual owner at least until the mortgage is discharged and, is why mortgagees take possession of the title for safekeeping once it has been issued by Registrar of Titles office.
What are the terms
and conditions of a mortgage?
These will vary from lender to lender but, at the very least, a mortgage will stipulate the amount of the loan (the “principal”), the term of the loan, the deposit to be paid by the borrower, the amount of each installment to be paid on the loan and, the interest to be repaid on the loan (the cost of the loan). There will also usually be other costs to be met by the borrower such as insurance and solicitor’s fees, all of which can add up to a significant amount. Before anyone enters into a mortgage, it is highly recommended that a lawyer’s advice is sought so that its terms and conditions can be explained in full and you know exactly what it is that you will be getting yourself into.
What is the effect
of a mortgage?
A mortgage sets out the rights of the parties and terms of the repayment of the underlying loan by the purchaser including certain vital matters such as the timeframe of repayment and the “cost” of the monies loaned. It is a legally binding document, giving the lender (also known as the “mortgagee”), a legal claim against the borrower’s home (in the event of default on the mortgage), and requires that the borrower/ purchaser pay back the loan as stipulated/ agreed in the terms of the mortgage.
What happens in
the event of default?
When a borrower agrees to a mortgage, he or she has entered into a legally binding contract using the property as security, to borrow monies on the condition that the amount borrowed (plus interest and other costs) are repaid within a certain timeframe. If the borrower fails to fulfil the conditions of the mortgage as stipulated, the lender/mortgagee ultimately has the right to take possession of the house/ property and sell it to cover the debt. This is obviously not a circumstance that a borrower wants to be in because as well as losing the property, the borrower’s credit rating and ability to secure a future loan/mortgage to buy a house will be severely limited.
That’s it for this week. Do not hesitate to contact us with questions at property.primer@fijitimes.com.fj. Have a good weekend and, we’ll see you again next Saturday.
DISCLAIMER: Please be advised that the contents of this column are intended for informational purposes only and are not intended to convey or constitute any form of legal advice whatsoever. You should not act upon any information contained herein without first seeking qualified professional counsel on your specific matter.
