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Mortgage
Participants and variant terminologyMortgage lenderBorrowerOther participantsMortgage by demiseMortgage by legal chargeEquitable mortgageHistoryForeclosure and non recourse lending
Participants and variant terminologyMortgage lenderBorrowerOther participantsMortgage by demiseMortgage by legal chargeEquitable mortgageHistoryForeclosure and non recourse lending
Mortgage by legal charge
In a mortgage by legal charge or technically "a charge by deed expressed to be by way of legal mortgage", the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it.
To protect the lender, a mortgage by legal charge is usually recorded in a public register. Since mortgage debt is often the largest debt owed by the debtor, banks and other mortgage lenders run title searches of the real property to make certain that there are no mortgages already registered on the debtor's property which might have higher priority. Tax liens, in some cases, will come ahead of mortgages. For this reason, if a borrower has delinquent property taxes, the bank will often pay them to prevent the lienholder from foreclosing and wiping out the mortgage.
This type of mortgage is common in the United States and, since the Law of Property Act 1925, it has been the usual form of mortgage in England and Wales (it is now the only form — see above).
In Scotland, the mortgage by legal charge is also known as standard security.
In Pakistan, the mortgage by legal charge is most common way used by banks to secure the financing. It is also known as registered mortgage. After registration of legal charge, the bank's lien is recorded in the land register stating that the property is under mortgage and cannot be sold without obtaining an NOC (No Objection Certificate) from the bank.