What you need to know about mortgage

A mortgage is a legal agreement or document through which a bank, building society, among others (creditor) lends money to the buyer of a property (debtor) at interest in exchange for taking title of the debtor’s property, with the condition that the transference of title becomes annulled upon the payment of the debt.

It can also be defined as a legal document by which the buyer of a property conveys to a creditor the property as security on a loan.

Although, some lenders do not need the buyer to put down a deposit and are willing to pay the total worth, within the Nigerian Mortgage industry, that is not usually the case.

Most lenders expect you to make a commitment towards the property you want to get by making an upfront payment while they loan you the rest.

But, where the debtor defaults on the agreement and stops paying the mortgage, the creditor can foreclose. When foreclosure happens, the bank can evict the tenants of the property, sell it and use the income realized from the sale to clear the mortgage debt.

Usually, a mortgage comes with a mortgage note, which is a legal document that offers a mortgage as proof of a debt and describes the terms under which the mortgage is to be repaid. It is a written promise to repay a mortgage loan plus interest; and is usually referred to as a promissory note, because the borrower promises to repay the debt.

It also sets out the terms of the transaction by stating the amount of the debt, the mortgage due date, the rate of interest, the amount of monthly payments, whether the lender needs monthly payments to build a tax and insurance reserve, whether the loan may be paid back with bigger or more regular payments without a prepayment penalty, and whether inability to make a payment or selling the property will warrant the lender to call the entire debt due.

The borrower, who is signing the note, and any cosigners, are personally liable for repayment of the debt and may require producing the mortgage note as evidence to the true owners of the debt during foreclosure proceedings.
Before you settle for a mortgage however, weigh your options and find know exactly which type of mortgage works for you.