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The Creation Of Mortgages Notes

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This is an extract of our The Creation Of Mortgages document, which we sell as part of our Land Law Notes collection written by the top tier of Oxford students.

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The creation of Mortgages Forms of Mortgages

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Two main forms of mortgage: o The Legal Mortgage
? Essentially where L gains a legal charge in the land mortgaged by M to L - two most common forms are:
? Repayment Mortgage

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Where M agrees with L to pay a constant monthly payment (subject to interest) o Over an agreed period of time
? Endowment Mortgage

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This is linked to an endowment life assurance policy o Essentially, the policy is designed to produce a sum large enough to pay off the sum borrowed on maturity (i.e. policy holder dying)
? With luck, there should be some surplus for the borrower o The lender is paid interest alone until the policy matures.
? This means that since M retains legal title to the mortgage, multiple mortgages can be arranged over the same fee simple

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However, the attractiveness of the mortgages are that the property can often be sold on default of payment by M o Which will not often repay the outstanding balance of two mortgages o The equitable mortgage
? This is encountered where

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Equitable interest mortgaged

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Agreement to mortgage in the future

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Where formalities for legal mortgage have not been satisfied o The charge over land
? This is different from a legal charge

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Equity recognises the charge as security short of a mortgage o Thus, the court can order the sale of the property or the appointment of a receiver o But there is no right of foreclosure nor right to take possession. How to create a mortgage

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Legal Mortgage o A deed o An intention to create a mortgage
? This is rather obvious when you have a Deed

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However, the courts will infer mortgages where the substance of a transaction of "absolute transfer" was in fact intended as security for an obligation o If the purchase price is a loan and the property is clearly intended to be recovered on repayment then = mortgage o BUT can have legitimate sale where property intended to be transferred but their remains an option of repayment.

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