A mortgage agreement is a contract between a borrower (the ‘mortgagor’) and a lender (the ‘mortgagee’) whereby real property owned by the borrower is held by the lender as security for a loan. If the borrower defaults on making the loan repayments, the property may be claimed by the lender in satisfaction of the debt.
Application for small business people
Mortgages are used by small business people to raise capital or to enable the purchase of additional property. Lenders are generally more willing to advance large sums of money where a property is used a security for the loan.
Small business people will frequently mortgage their own personal property in order to raise money for their business. This can be a risky option, especially if there is some doubt about the future viability or success of the business. It is very important to be aware that defaulting on mortgage repayments can entitle the lender to take possession of the property as settlement of the debt. It is vital that borrowers are clear of their rights and obligations under the mortgage agreement, and the serious consequences that it entails.
The details of the mortgage must be registered with the relevant land title office. It is then noted on the property’s certificate of title. The loan must be repaid in full, and the mortgage officially discharged, before the property can be sold.
6 key things to consider
There are several important factors that you should be aware of before entering into a mortgage agreement. These include:
- What are the terms of repayment of the debt?
- What is the applicable interest rate on the debt?
- Is the borrower able to repay the debt early?
- What happens if the borrower defaults on the debt?
- Has the property has been used as security for any other loans?
- Does the mortgagor have authority to enter into the agreement? This is particularly relevant if the borrower is a company or partnership.
Legal Practitioner Director
The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.
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