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Mortgages are security interests, usually given to a lender of money to secure a loan. They allows a lender (the mortgagee), to be confident that in the event that a loan is not paid off by a borrower (the mortgagor), the security may be used to recover the loan amount. The security interest will automatically come to an end once the mortgagor has paid off the loan amount and any additional costs required, such as interest. It is a common misconception that mortgages are ‘given out’ by banks, such that a person ‘obtains a mortgage’. This is not technically correct. A borrower (mortgagor) grants a mortgage to a mortgagee (bank) in return for a mortgage loan, which will be paid off over time, and with interest. The term ‘mortgage’ describes the security interest granted.
Creation of mortgages
Mortgages can be created to secure credit agreements over both unregistered and registered land. They can be either legal or equitable in nature, and their creation can be affected by both misrepresentation and undue influence, which are both discussed in more detail in the contract law revision notes section of this website.
In unregistered land, mortgages over freehold (fee simple) estates can be created in two ways, according to section 85 of the Law of Property Act (LPA) 1925. Section 86 is an equivalent section applicable to leasehold estates, as long fixed term leases provide sufficient security for a mortgagee...
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