As we mentioned in previous article, buying a home is one important decision that many people have to made sometime in their life. If you decide to buy a home now, there are many thing you have to known and many papers have to be signed before the home you brought can be registered to your name.When home, house or real estate is used to secure a loan, the borrower signs a contract called a mortgage. It is a contract refers to the borrower as the mortgagor, and the lender is called the mortgagee. In this article, we will discuss the mortgage contract.
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1. Equity of Redemption in mortgage contract
The right to redeem the property and to have the ownership transferred back when the mortgage is discharged.
a) In the mortgage contract, the mortgagor (the home buyer) agrees to transfer the ownership of the property to the mortgagee (usually is a financial institution or private lender) as security for the loan, until all amount of loan is repaid.
b) Both thee mortgagor and mortgagee sign the contract with or without third party witness.The mortgagor will receive a copy of the signed mortgage, and the mortgagee will retain the original.
2. The mortgage contract
There are 5 features of a mortgage contract
a) Detail of description of the property
b) identification of the mortgagor (the home buyer) and mortgagee (the person/bank lending the money to buy the house)
c) The amount of the mortgage with terms of repayment and amount of repayment as well as the interval of payment (usually weekly, biweekly, semi monthly or monthly)
d) Certain promises or covenants.
The contract stipulates that the mortgagor must
(i) make payments on time
(ii) pay the taxes
(iii) keep the property insured
(iv) keep the property in good condition
(v) not sell the property without the mortgagee’s written approval.
f) An agreement that the mortgagor will give a charge on the property to the mortgagee, but will keep the right of possession and the right to redeem the property, when the mortgage is discharged.
If home buyer default on paying he or she monthly mortgage payments, he or she can lose your house (foreclosure).
Amortization Period
Repayment of a mortgage can take as long as 25-30 years.This time period is called the amortization period.
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When home, house or real estate is used to secure a loan, the borrower signs a contract called a mortgage. It is a contract refers to the borrower as the mortgagor, and the lender is called the mortgagee. In this article, we will discuss the mortgage contract
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