Mortgages Flashcards
What is a mortgage in legal terms?
A) A contractual agreement to lend money
B) A leasehold interest in property
C) A short-term financial arrangement between borrower and lender
D)A proprietary right in land used as security for a loan
D) A proprietary right in land used as security for a loan
Explanation:
A mortgage is not just a loan agreement; it is a proprietary right that secures the lender’s interest in the property.
Who is the mortgagor in a mortgage arrangement?
A) The estate agent selling the property
B) The lender who provides the loan
C) The person who values the property
D)The borrower who grants rights over the property as security
D) The borrower who grants rights over the property as security
Explanation:
The mortgagor is the borrower who grants the mortgage over their property as security. The mortgagee is the lender.
What are the formal requirements for creating a legal mortgage?
A) It must be in writing and witnessed by one person
B) It must be created by deed and registered at the Land Registry
C) It must be signed by both parties in front of a solicitor
D) It can be created orally if both parties agree
B) It must be created by deed and registered at the Land Registry
Explanation:
Under the Law of Property Act 1925, a legal mortgage must be executed as a deed and registered to be enforceable.
When does an equitable mortgage arise?
A) When a mortgage is created but not by deed or registered
B) When a lender has absolute ownership of the property
C) When the lender allows a borrower to pay in installments
D) When a mortgage term exceeds 25 years
A) When a mortgage is created but not by deed or registered
Explanation:
If a mortgage does not meet the formalities of a legal mortgage (e.g., lacks a deed or registration), it may be equitable instead.
What does Equity of Redemption mean?
A) The lender’s right to charge additional interest
B) The borrower’s right to repay the loan and reclaim ownership
C) The lender’s right to repossess at any time
D) A contract between borrower and lender to modify repayment terms
B) The borrower’s right to repay the loan and reclaim ownership
Explanation:
The Equity of Redemption ensures that a mortgage is only security for a loan and not a way for the lender to obtain unfair advantages.
What is undue influence in mortgage law?
A) When a borrower is pressured into a mortgage agreement unfairly
B) When a lender offers incentives to secure a mortgage
C) When a borrower agrees to additional security
D) When a mortgage agreement has unfair terms
A) When a borrower is pressured into a mortgage agreement unfairly
Explanation:
A mortgage can be set aside if the borrower was pressured (e.g., by a spouse) into signing it without full understanding.
Which mortgage takes priority when multiple mortgages exist on a property?
A) The mortgage that has the highest loan amount
B) The first mortgage registered
C) The mortgage with the lowest interest rate
D) The mortgage that was verbally agreed first
B) The first mortgage registered
Explanation:
In priority disputes, the earliest registered mortgage generally ranks first, unless other rules apply.
When can a lender exercise its right to possession?
A) Immediately upon mortgage creation
B) Only if the borrower defaults on payments
C) Only with a court order
D) When the borrower has paid over half of the loan
C) Only with a court order
Explanation:
A lender can take possession if a borrower defaults, but for residential properties, a court order is required unless the property is vacant.
What must a lender do before exercising the power of sale?
A) Obtain a written agreement from the borrower
B) Ensure the power of sale has arisen and become exercisable
C) Get permission from the Land Registry
D) Wait at least 12 months after default
B) Ensure the power of sale has arisen and become exercisable
Explanation:
The lender’s power of sale is not automatic—it must be validly triggered under statutory rules before sale.
What is the lender’s main duty when selling a repossessed property?
A) Sell at the best price reasonably obtainable
B) Sell at auction only
C) Sell within 30 days of repossession
D) Sell back to the original borrower first
A) Sell at the best price reasonably obtainable
Explanation:
Lenders must act fairly when selling, ensuring they achieve the best market price to cover the borrower’s debt.
