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mortgage

An interest in property created as a form of security for a loan or payment of a debt and terminated on payment of the loan or debt. The borrower, who offers the security, is the mortgagor; the lender, who provides the money, is the mortgagee. Virtually any property may be mortgaged (though land is the most common); exceptions include the salaries of public officials. The name is derived from Old French (literally: dead pledge), since at common law failure to repay on the due date of redemption (which in most mortgages is set very early) formerly resulted in the mortgagor losing all his rights over the property. By the rules of equity the mortgagor is now allowed to redeem his property at any time on payment of the loan together with interest and costs (see *equity of redemption). The mortgagee has a right to take possession of the mortgaged property as soon as the mortgage is made, irrespective of whether the mortgagor has defaulted. However, this right (1) must only be used for the purpose of protecting or enforcing the security, (2) may be excluded by agreement, or (3) is subject to a power in the court to adjourn proceedings for possession, to suspend the execution of an order for possession, or to postpone the date for delivery of possession, where the mortgaged property is a dwelling house (Administration of Justice Act 1970). This right is normally used as a preliminary to an exercise of the mortgagee’s power of sale. In face of continued nonpayment of the loan, the mortgagee may sell the mortgaged property under a *power of sale, appoint a *receiver, or obtain a decree of *foreclosure.

Under the Law of Property Act 1925 the only valid legal mortgages are (1) a lease subject to *cesser on redemption and (2) a deed expressed to be a charge by way of legal mortgage (see *charge). All other mortgages are equitable interests only (see *equitable mortgage). All mortgages of registered land are noted in the charges register on application by the mortgagee (see *land registration), and a *charge certificate is issued to him. When mortgaged land is unregistered, a first legal mortgagee keeps the title deeds. A subsequent legal mortgagee and any equitable mortgagee who does not have the title deeds should protect his interests by registration (see *puisne mortgage; *registration of encumbrances). See also *priority of mortgages.

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