A mortgage contract is a legally binding document between a lender (mortgagee) and a borrower (mortgagor) that pledges a specific property as collateral to secure a loan. It creates a lien on the property, granting the lender the right to take possession and sell the property through foreclosure if the borrower fails to repay the debt.
- Purpose: To secure a real estate loan, acting as the security document for a promissory note.
- Parties: Identifies the borrower(s) and the lender(s), including any guarantors.
- Property Description: Provides a detailed legal description of the real property being used as collateral.
- Loan Terms: Outlines the loan amount (principal), interest rate (fixed or adjustable), repayment schedule (monthly installments), and maturity date.
- Covenants & Obligations: Requires the borrower to maintain the property, pay property taxes, and maintain insurance.
- Default & Remedies: Defines what constitutes a breach of contract (e.g., missed payments) and the lender’s rights to accelerate the loan (make the full balance due) and initiate foreclosure.
- Discharge: States that the mortgage becomes null and void once the debt is fully repaid.
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