A Mortgage is a loan for the purpose of buying a home. It is a “secured loan,” meaning that you have to put up collateral in exchange for the loan. In the case of a Mortgage, the collateral is the home itself. You repay the Mortgage in monthly installments. If you don’t pay, the lender can foreclose–that is, take the house and sell it.
What’s in a Mortgage?
A Mortgage contains numerous covenants or promises between the Borrower and the Lender.
- Payment of Principal and Interest: Borrowers promises to pay the Mortgage on-time and any late charges as outlined in the Promissory Note.
- Funds for Taxes and Insurance: Borrower promises to pay taxes and insurance on-time pursuant to the Promissory Note.
- Application of Payments: Lender shall apply all payments received in the following order; first to taxes and insurance; second to interest; and lastly to the principal of the Mortgage.
- Prior Mortgage; Liens: Borrower shall pay any prior Mortgage or lien on-time that has priority over this Mortgage.
- Hazard Insurance: Borrower shall insure the Property against loss by fire, and other hazards.
- Preservation and Maintenance of Property: Borrower shall keep the Property in good repair and shall not deteriorate or destroy the Property.
- Protection of Lender’s Security: If Borrower fails to insure Property, Lender is allowed to protect it’s interest by taking out a mortgage insurance policy on the Property. Borrower is responsible for paying the premium on this insurance policy.
- Inspection: Lender is allowed to inspect the Property provided reasonable notice is afforded to the Borrower.
- Condemnation: Any award or damages related to condemnation of the Property are assigned to the Lender.
- Borrower Not Released; Forbearance By Lender Not a Waiver: A Borrower is liable to the Lender for any missed payments, even if a successor in interest of the Borrower is making payments on the loan.
- Successors and Assigns Bound: Joint and Several Liability; Co-Signers: The covenants and agreements within the Mortgage shall apply to any successors of the Borrower and Lender.
- Notice: Any notice to Borrower provided by Mortgage will be mailed by certified mail. Any notice to Lender should be mailed by certified mail.
- Governing Law; Severability: The law applicable to the Mortgage shall be the laws of the jurisdiction in which the property is located.
- Borrower’s Copy: Borrower shall be provided a copy of the Promissory Note and Mortgage at the time of execution.
- Rehabilitation Loan Agreement: Borrower shall fulfill all of the Borrower’s obligations under any home rehabilitation, repair, or other loan agreement which Borrower enters into with Lender.
- Transfer of the Property or a Beneficial Interest in Borrower: If all or part of the Property is sold or transferred without Lender’s prior written consent, Lender may, at its option, require immediate payment in full of all sums secured by this Mortgage. If Lender exercise this option, Lender shall give Borrower 30 days notice of acceleration of the loan. Borrower must pay all sums secured by this Mortgage within 30 days or Lender may invoke any remedies permitted by this Mortgage without further notice to Borrower.
- Acceleration: Lender shall give notice to Borrower of Borrower’s breach of any covenant or agreement in this Mortgage. Lender shall inform Borrower of the: (1) breach; (2) the action required to cure the breach; (3) a date, not less than 30 days from the date the notice is mailed to Borrower by which such breach must be cured; and (4) notice that failure to cure breach on or before the date specified in the notice may result in acceleration of the sums secured in the Mortgage, foreclosure by judicial proceedings, and sale of the Property.
- Borrower’s Right to Reinstate: Borrower shall have the right to discontinue any proceedings begun by Lender at any time prior to at least one hour before the commencement of bidding at a sheriff’s sale if: (a) Borrower pays Lender all sums due under this Mortgage and Note had acceleration not occurred; (b) Borrower cures all breaches of any other covenants contained in this Mortgage; (c ) Borrower pays all reasonable expenses incurred by Lender in enforcing the covenants and agreements of Borrower contained in this Mortgage, including, but not limited to, reasonable attorney’s fees; and (d) Borrower takes such action has Lender may reasonably require to assure that the lien of this Mortgage, Lender’s interest in the Property and Borrower’s obligation to pay the sums secured by this Mortgage shall continue unimpaired. Upon such payment and cure by the Borrower, this Mortgage and the obligations secured hereby shall remain in full force and effect as if no acceleration had occurred.
- Assignment of Rents: As additional security, Borrower hereby assigns to Lender the rents of the Property upon acceleration or abandonment of the Property. All rents collected by Lender shall be applied first to payment of the costs of management of the Property and collection or rents.
- Release: Upon payment of all sums secured by this Mortgage, Lender shall discharge this Mortgage without charge to Borrower.
- Interest Rate After Judgment: Borrower agrees that the interest rate payable after a judgment is entered ion the Note or in an action of mortgage foreclosure shall be the rate stated in the Note.