Definition of a Mortgage Deed
The mortgage deed is the evidence of the interest transferred to the mortgage holder. Often simply referred to as the mortgage, the mortgage deed is the document transferred to the mortgage holder.
When a real estate owner secures a loan through a mortgage, it is necessary for the owner to transfer an interest in the property to secure the loan. The real estate interest transferred is the right to retain a lien on the property, and the right to foreclose upon the lien if the mortgage is not paid as agreed.
Mr. McGillicuddy purchases a home for $200,000, of which he borrows $150,000 via a mortgage loan. To secure the mortgage, Mr. McGillicuddy will sign a note for the $150,000 loan and a mortgage deed, granting the mortgage holder the right to retain a lien on the property, with the ability to foreclose should the mortgage go into default. The mortgage deed may be combined with the note into one document. The mortgage deed will be filed as a public record and retained by the mortgage holder until paid.
Mortgage deeds have been a part of real estate transactions for hundreds of years, dating back to English common law. Mortgage deeds are necessary because the mortgage lender will need your permission to place a lien on the property you purchase. In exchange, the mortgage lender agrees to lend you the specified funds. Without a mortgage deed, a lender may be able to sue you in the event of default, but may not have the ability to retain the property as security. Thus, the lender requires all borrowers to sign a mortgage deed.
The mortgage deed is typically signed at your solicitors office as part of the closing of the real estate transaction. The lender will file the document publicly and it will list your name, the lender’s name, the address of the property, the legal description of the property and the original amount of the loan. The lender has the ability to sell or assign the mortgage deed to a third party.
First Foundation works along side your solicitor to ensure that you have an understanding of the mortgage documentation you will be required to review and sign as part of the real estate transaction. Be sure to ask one of our licensed mortgage brokers if you have any questions at any time during the home buying process.
If you are interested in learning more about a mortgage deed, please feel free to contact us today!