Mortgage Law

Like with all undertakings that involve more than one party, mortgage refinancing too has established laws that ensure that mortgage lenders, mortgage loan beneficiaries an other parties involved in the mortgage business operate as is required and that no party takes undue advantage on the other.

Mortgage law however differs from one state or jurisdiction to the other, depending on the circumstances that exist within a state or jurisdiction. However, all mortgage laws are designed and enacted to serve the same purpose; ensure a smooth and regulated operation of the mortgage business.

Generally, a mortgage can be either legal, demise or equitable:

Legal Mortgage

In a legal mortgage, the mortgage refinancing lending institution retains all the rights to a house it has provided a loan for. However, the house owner remains the recognized owner under mortgage law. The rights that the lender has over the house are meant to enable it (lender) to secure its loan amount, in which case, if the borrower defaults on repayments, the lender has the right to sell off the house to recover its loan.

Legal mortgage agreements are usually recorded in public registers from which searches can be made by lending institutions to ascertain whether another mortgage refinancing on a house has been registered. Further registration is also made with other agencies that deal with property matters such as public land register.

Legal mortgage is the most common type of mortgage law that exists in many countries across the world.

Equitable Mortgage

Unlike in legal mortgage law, equitable mortgage only requires a house owner to deposit his/her house' and land title with a mortgage refinancing lender to secure a loan. The law requires that the house owner signs a Memorandum of Deposit of Title Deed with the lender, of which he/she must have a copy as proof that indeed a title was deposited.

Like with legal mortgage, a mortgage refinancing institution can sell the house if the borrower defaults in repaying his/her loan. Equitable mortgage is presently not popular in most jurisdictions.

Demise Mortgage

This is the oldest type of mortgage law that was used from the earlier times. In demise mortgage refinancing, the lending institution takes over the ownership and rights over a house by taking into possession of all the documents that relate to it. This is until when the borrower pays up all the loan including interest rate and other costs relating to the loan.

Although still in existence in some jurisdictions, demise mortgage refinancing is slowly loosing ground.

It at times happens that a mortgage refinance borrower does not use the loan on specifically buying a house but instead buys another property such as land. In the event that the borrower default on repaying the loan, mortgage law stipulates that the borrower's house together with the tract of land bought are all charged on the loan, meaning that both can be sold off by the lending institution to recover its money. In case, such land bought has been divided into several pieces and sold off, the lending institution has the right to proceed and sell off such pieces if those of the borrower are not sufficient to repay the loan.