A mortgage can either be a legal mortgage, which happens when you sign a deed prepared by an attorney-at-law, which conveys what we call the legal title to the property, or an equitable mortgage, which happens when you deposit your original deed with someone as a security document to strengthen you promise to repay your indebtedness or perform some other obligation.
You give a mortgage subject to something the law calls “the equity of redemption” that is, the interest you continue to own until you repay the loan or other indebtedness. The equity of redemption is the right to repay all that you owe to the bank, credit union, friend or hardware firm, and to have all interest in the property returned to you.
Generally, you have the right to do so anytime after you obtain the loan or other benefit given to you. This right may be subject to conditions that you have agreed with the lender, for example, the need to give a certain amount of notice before pay off, failing which, the payment of a penalty.
This is one of the reasons why it is important that you read and understand all the terms and conditions set out in the mortgage deed, before you sign it. If you are unable to understand it, obtain independent legal advice on it.
When your loan is fully repaid, you must have a reconveyance prepared by an attorney-at-law of your choosing. A reconveyance says that the lender no longer has an interest in your property. Simply collecting your original deed(s) from the lender is not enough.
However, if you had only given an equitable mortgage, simply collecting your deed(s) back will be enough evidence that you have repaid your debt.
Whether a legal mortgage or an equitable mortgage, the person who takes the benefit of the mortgage, known as a mortgagee, is entitled to enforce the security given by the mortgage if you default, in any of the following ways:
- Suing you for monies due and owing;
- Selling your property under the power of sale to realise the debt;
- Foreclosure proceedings against your property to completely deprive you of all interest in the property; and
- Possession proceedings, in cases where this is the property in which you reside, in order to get you out of the property.
In most of the cases outlined above, the lender can pursue the options simultaneously, and if the property is sold in the exercise of the power of sale and the debt is not satisfied, the lender is entitled to recover the balance of the debt from you in other ways.
Where the mortgage is an equitable mortgage, all the lender has to do to be able to exercise all the powers that the lender who has a legal mortgage can exercise is to obtain a Court order declaring it to be the legal mortgagee of the property.
Grenada Bar Association