What’s the issue? Show It is becoming more common for mezzanine lenders to accept an unregistered mortgage as security for a loan. While an unregistered mortgage gives the lender priority over any of the borrower’s unsecured creditors, an unregistered mortgage does not give a lender the same entitlements or benefits as a registered mortgage. So what does registration get me? What do I get if I don’t register? The holder of an unregistered mortgage may be able to apply to the Supreme Court for an order to enforce the terms of the unregistered mortgage and secure the sale of the property, however the court will have a wide discretion as to whether to grant such a request. If the lender has acted unconscionably in any way, the court may not grant the order. What if I include a clause that
entitles me to register the mortgage if the borrower defaults? Where a default has occurred and the only reason that the lender wants to register the mortgage is to take enforcement action, it is unlikely that the borrower will cooperate and ask the first lender to produce the title. It is even more unlikely that the first lender will co-operate to enable the second mortgage to be registered. Instead, the first lender may take enforcement action under their own mortgage. Is there anything else I can do? At least I get priority over all other subsequent creditors So it’s not worth much then, is it? Where the secured property is subject to a prior mortgage, the holder of the first mortgage is likely to take enforcement action under
their own mortgage if the subsequent lender attempts to appoint a receiver or seek a court order. This is because: In this scenario, after the holder of the registered mortgage has sold the property and recovered all that they are owed, the surplus would be made available to the other secured creditors such as the holder of an unregistered mortgage. Take away It is recommended that careful consideration and appropriate advice be obtained before a lender lends funds on the basis of an unregistered mortgage. John Morrissey is a Senior Associate with MV Law with over 17 years’ experience in commercial property acquisition, development, realisation and finance who has worked both in private practice and as in-house counsel for a European bank during the Global Financial Crisis. For more information contact: John Morrissey Senior Associate Property, Commercial and Finance Christine Murray Managing Partner Property, Commercial and Finance What is a loan called that is obtained for the purpose of replacing the existing mortgage?A cash-out refinance is a mortgage refinancing option that lets you convert home equity into cash. A new mortgage is taken out for more than your previous mortgage balance, and the difference is paid to you in cash.
What are the two parts to a mortgage loan?Transcript: The components of a mortgage payment
The Principal portion is the amount that pays down your outstanding loan amount. Interest is the cost of borrowing money. The amount of interest you pay is determined by your interest rate and your loan balance.
What can a mortgage be classified as?From the perspective of the borrower, the mortgage is considered a long-term liability. Any portion of the debt that is payable within the next 12 months is classified as a short-term liability.
In which of the following types of loans is the payment allocated only to interest?An interest-only mortgage is a type of mortgage in which the mortgagor (the borrower) is required to pay only the interest on the loan for a certain period. The principal is repaid either in a lump sum at a specified date, or in subsequent payments.
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