Mortgages and Financing

It has been often noticed that borrowers do not pay attention to their mortgage agreement after the lender has approved their mortgage amount.

Before signing the mortgage agreement you should know your rights and obligations under the mortgage agreement and the same applies with the lender.

Rights under Mortgage Agreements

All parties involved in the mortgage agreements have different rights and obligations depending on the State they reside in.

Borrowers have various rights under mortgage agreements which include:

  • the credit contract should set out all the terms and conditions of the mortgage clearly and a copy of it should be provided to the borrower. This contract is also referred to as the Letter of Offer. The borrower should cross check the Letter of Offer whether it is in line with the original proposal and specially the financial part which includes mortgage amount, interest rate, term of the mortgage and its structure. Other different clauses are also present in the offer depending upon the type of the mortgage such as early termination costs;
  • if there is any change or increase in interest rates, the lender before application of new rates, must inform the borrower either directly or through newspaper advertisement;
  • if there is any change or increase in repayment amount, then, 20 days prior to such change, the lender must inform the borrower or their representative directly in writing;
  • the lender should provide mortgage statement to the borrower at least every 6 months;
  • borrowers can clear out the entire mortgage amount and can go for a pre-closure of their mortgage account or discharging the mortgage. An extra fees or charges may apply depending upon the type of the mortgage; and
  • borrowers can extend their repayment schedule by applying to the lender for hardship variation under the Credit Law, when they are facing financial hardship in their life.

Borrowers Obligations under Mortgage Agreements

Under mortgage agreements, borrowers have the following obligations:

  • the borrowers need to be truthful and should provide all factual details while applying for the mortgage;
  • all mortgage repayments should be made before or on the due date;
  • the borrower should keep the property in good condition and should always take prior consent from the lender before undertaking any major alterations in the property;
  • the borrower should take proper insurance on the full value of the property and should keep it up to date; and
  • the borrower should not re-sell or lease or re-mortgage the property with any prior consent from the lender.

In a mortgage agreement, the lender should enter the name and other personal details of the borrower accurately otherwise the agreement stands null and void.

The lender should ensure that the borrower returns all the required documentation signed back to them before the Offer Lapse Date specified in the mortgage agreement.

The lender should also ensure that all the amounts specified in the Financial Table in the mortgage agreement are corrector else the borrower can raise an issue regarding the said agreement and may not accept the same.

In the event the borrower cannot make repayments of his home loan within a period of 6 months after the loan has become due and payable, the lender can serve a default notice on the borrower demanding payment of the loan.

If the borrower fails to respond to the default notice and does not arrange to pay the home loan amount, the lender under such circumstances can sell the mortgaged property subject to certain legislative compliances.

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