Mortgage Form

What is Mortgage Agreement?

A Mortgage Agreement, also called Mortgage Deed, is a written document that officially recognizes a legally binding relationship between two parties – the Borrower and the Lender. The Borrower grants the Lender conditional ownership in certain property or assets as a security interest against a loan until the loan is repaid in full. It is separate from the Loan Agreement or Promissory Note which creates the actual loan and sets out the terms and conditions of the loan. The Mortgage Agreement may also have a co-signer (called the guarantor) which is a person who is jointly responsible for the repayment of the loan should the mortgagor default on the loan payments. A guarantor is needed if the mortgagor's income situation means that they can't secure a loan on their own.

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When to use?

The purchase of a property or a home is often a big investment that involves a substantial amount of money. Lenders will want added security before loaning large sums of money to ensure that they will recoup their investment. A Mortgage Deed allows them to take possession and sell the property if the Borrower stops making loan payments. It also gives buyers the ability to borrow large sums of money and provides incentive to make payments on the loan or risk losing their property. As a reference, a mortgage deed is also known by other names: - Mortgage Contract - Deed of Mortgage - Chattel Mortgage (for personal property)

What are included?

A simple Mortgage Agreement will identify the following basic elements: - Borrower: who is borrowing the money and pledging the property - Lender: who is lending the money and receiving a lien on the property - Principal Amount: the sum of money being borrowed - Property: a legal description of the property being pledged A Mortgage Deed may include these additional provisions: - Assigned Rents: if the Borrower is leasing out the property, rents are assigned to the Lender - Covenants: the Borrower promises that it owns the property and has the authority to the property - Default and Acceleration: if the Borrower defaults, the entire amount of the loan will become due - Maintenance of Property: the Borrower must maintain the property, including insurance on the property - Ownership Transfer: the entire amount of the loan may become due if the Borrower transfers ownership - Payment: the Borrower promises to pay the Principal and Interest, and other necessary amounts, on the loan - Rights of Lender: payments by the Lender to maintain the value of the property can be added to the loan amount - Security Interest: the agreement also secures any other liabilities of the Borrower to the Lender - Senior Mortgages: the Borrower cannot modify any senior mortgages with the Lender’s permission - Tax Fund: the Borrower may have to make payments to a fund to pay for property taxes, insurance and other assessments This agreement must be filed with the appropriate local recording office.