In common parlance, mortgage often refers to the loan taken out to finance the house or other immovable property. Actually, the mortgage is the right given to the bank or other creditor to sell the house or other immovable property if the interest or repayment is not paid.
So the mortgage right is given by you to the creditor to get a mortgage money loan. Sometimes a mortgage right is also given to provide security for a security deposit or a pre-existing debt.
By establishing a mortgage, the creditor has more security. As a result, less interest often has to be paid. When it comes to a loan from a family member or one's own business, a mortgage can ensure that the tax authorities also accept a lower interest rate.
When you borrow money from your parents and they eventually need the money for retirement or other things, establishing a mortgage is wise. Then it is not about the fact that you might not want to pay back, but you want to give security. Suppose the house is repossessed, you run the risk of not being able to pay back because the repossessor comes first.
When borrowing money from a bank, it often wants extra security in the form of a pledge of life insurance in addition to the mortgage. This way, the bank has the security that in case of the debtor's death, part of the loan is immediately repaid. This can also be nice for a debtor because it can guarantee that a partner or heirs can continue to live in the house. The method of pledging and especially the beneficiary has far-reaching consequences for inheritance tax and heirs. It is important to let us inform you properly about the pros and cons of the various options.
The mortgage is established by registering a notarial deed at the land registry. In that deed, the creditor and the owner of the property are parties. It is possible to also record the money loan in the notarial deed, but this is not necessary. The advantage for the creditor of including the money loan in the deed is that if the proceeds of the immovable property are insufficient, other assets of the debtor can be immediately attached in execution.
The sale by the mortgagee can only take place if the claim for which the mortgage is established becomes due and not repaid at that time. At that time, the sale must be done publicly through an auction. This should guarantee the highest possible proceeds. In practice, this often turns out not to be the case because a normal purchase agreement with guarantees and financing proviso cannot be concluded.
For more information on mortgage establishment and the rights and obligations of the parties involved, please contact us. We will be happy to advise you.
