Mortgage Deed and Contract

Mortgage Deed and Contract: Understanding the Key Differences

When it comes to buying a property, the process can be a bit overwhelming. From finding the right home to obtaining financing, there are many factors to consider. One important aspect that often causes confusion is the difference between a mortgage deed and a mortgage contract. In this article, we`ll take a closer look at these two documents and highlight their key differences.

What is a Mortgage Deed?

A mortgage deed is a legal document that establishes the ownership of a property. It is used to transfer the ownership of the property from the seller to the buyer. The mortgage deed contains information about the property, such as the address, the legal description, and any liens or encumbrances that may exist. The document also contains the terms of the mortgage, including the amount of the loan, the interest rate, and the repayment schedule.

Once the mortgage deed is signed, it is recorded with the local government, which establishes the buyer`s ownership of the property. The mortgage deed also serves as security for the mortgage loan. If the borrower fails to make payments on the loan, the lender can foreclose on the property and sell it to recover the outstanding debt.

What is a Mortgage Contract?

A mortgage contract is a legal agreement between the buyer and the lender. This document outlines the terms of the mortgage loan, including the interest rate, repayment schedule, and any penalties for late payments or default. The mortgage contract also contains information about the borrower, such as their income and credit history, which is used to determine whether they qualify for the loan.

Unlike the mortgage deed, the mortgage contract is not recorded with the local government. However, it is a legally binding document that sets out the obligations and responsibilities of both the borrower and the lender. The mortgage contract serves as evidence of the debt owed by the borrower to the lender.

Key Differences between a Mortgage Deed and a Mortgage Contract

The main difference between a mortgage deed and a mortgage contract is that the mortgage deed establishes ownership of the property, while the mortgage contract establishes the terms of the loan. The mortgage deed is a public record that is recorded with the local government, while the mortgage contract is a private agreement between the buyer and the lender.

Another important difference is that the mortgage deed is a one-time document that is signed at the time of purchase, while the mortgage contract may be updated or amended over the life of the loan. For example, if the borrower wants to refinance the loan or make changes to the repayment schedule, a new mortgage contract may be required.

Lastly, the mortgage deed is typically signed by both the buyer and the seller, while the mortgage contract is only signed by the borrower. This is because the mortgage contract is an agreement between the borrower and the lender, and does not involve the seller of the property.

In conclusion, understanding the difference between a mortgage deed and a mortgage contract is important when buying a property. The mortgage deed establishes ownership of the property, while the mortgage contract outlines the terms of the loan. By knowing the key differences between these two documents, buyers can make informed decisions and avoid any confusion during the buying process.