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Mortgage Deed Explained
A mortgage deed is a legal document a property buyer and mortgage lender sign to validate the terms and conditions of the mortgage offer.
It helps a home buyer secure a home loan and creates a charge over the property. The lender uses this charge as a security tool to repossess and sell the property if the client defaults on their home loan.
Why is a mortgage deed important?
Mortgage lenders use a mortgage deed to bind the buyer to the loan conditions.
They also protect mortgage lenders, allowing them to foreclose on the property if clients fail to repay their home loans. The lender can then sell the property and recoup their investment.
Usually at the start, mortgage deeds also offer borrowers protection by keeping the mortgage’s interest rate fixed. This mechanism ensures that the homebuyer won’t have to pay a higher instalment should mortgage rates increase.
What Details Are Included In A Mortgage Deed?
These deeds play an important role in the mortgage process and contain:
- Names of the client and lender
- Property details and address
- Amount of the home loan
- Conditions of the mortgage
- Mortgage repayment schedule
- Security taken on the loan
- Mortgage term and end date
- Mortgage interest rate
Signing A Mortgage Deed
You must sign a mortgage deed before your home loan funds are released to indicate that you accept your lender’s mortgage offer.
The deed is a formal, legally binding document. Therefore, it’s important to read the terms and conditions carefully before signing the agreement.
Who needs to sign a mortgage deed?
For the mortgage deed to be legally binding and valid, it must be signed by:
- The mortgage lender
- The client or borrower
- Two witnesses
How to witness a mortgage deed
The borrower and lender (through its representative) must sign the legal document in the presence of two independent witnesses.
A mortgage deed witness must be older than 18 and can be a friend, neighbour, or colleague of either party. Family members are not allowed to act as an independent witness.
The witnesses may watch each party sign the deed but the signatures must be separately witnessed. The witnesses must also sign the document in the presence of the buyer and lender and indicate their full names and addresses on the deed.
Parties can also sign their mortgage deed electronically on the UK government website.
What happens after the mortgage deed is signed?
A signed mortgage deed means the client accepts the mortgage offer and terms and conditions.
After it is signed, the mortgage agreement becomes legally binding and the borrower becomes liable for the monthly repayments.
Next, the borrower pays their mortgage deposit (via their solicitor), the parties exchange contracts, and the lender releases the funds for the purchase.
Registering The Mortgage Deed
The charge over the property is created when the mortgage deed is registered.
The deed is registered online or by mail with the Land Registry. To register the deed, you’ll also need to pay a registration fee.
What happens if the mortgage deed is not registered?
Failure to register a mortgage deed hampers the rights of the mortgage lender. The lender does not obtain a charge over the property and can not repossess the property if the borrower defaults on their loan repayments.
Discharging Your Mortgage Deed
When you have paid your final instalment you will need to get the mortgage deed discharged.
Your mortgage lender will send you the following documents:
- A closing statement letter
- A copy of your title deeds
- A discharge
The closing statement letter confirms that your mortgage debt was settled in full.
You’ll use the discharge to remove the lender’s charge over your home. You can instruct your conveyancing solicitor to submit a security discharge application to the Land Registry on your behalf. The standard security is discharged once your application has been processed.
The deeds title register will then be updated to reflect that you are the legal owner of the property.
FAQs
What do I do if my mortgage deed goes missing?
If you can’t find your mortgage deed, contact your lender and ask them for a copy. Also, contact HM Land Registry and register a lost mortgage deed to prevent someone else from using your deed to commit mortgage fraud.
What are the different types of mortgage deeds used in the UK?
In the UK, there are two types of mortgage deeds:
- Standard security deed: This deed creates standard charges over the property and is the most commonly used.
- Deed of collateral mortgage: More commonly used for complex mortgages when buying a business or a buy-to-let property.
Sources:
https://myurbanjungle.com/explore/blog/what-is-a-mortgage-deed/amp/
https://www.theknowledgeacademy.com/blog/what-is-a-mortgage-deed/
https://thinkplutus.com/mortgages/guides/mortgage-deed/
https://www.masterclass.com/articles/mortgage-deed-explained
https://thinkplutus.com/mortgages/guides/mortgage-deed/
https://sign-your-mortgage-deed.landregistry.gov.uk/
https://www.reallymoving.com/conveyancing/guides/stages-of-the-conveyancing-process
https://www.enact.co.uk/2017/04/completing-mortgage-deed/
https://www.moneysupermarket.com/loans/loans-against-property/
https://cameronstephen.co.uk/faqs/what-is-standard-security/
https://www.moneysupermarket.com/loans/loans-against-property/