A deed is a legal document that is signed between a creditor and debtor as insurance or guaranty for the safe and secure return of the loan. On the other hand, a deed in real estate property is a document that indicates towards the actual owner of the property or the new buyer in case of selling of the property.
Introduction to the Mortgage Deed:
A mortgage deed is a written agreement between two parties i.e. individuals or companies in which one is borrowing money from the other one. Unlike a simple loan agreement or a loan deal, in mortgage deed, the debtor agrees to pledge some property with the creditor as collateral so that if the debtor is unable to pay back the debt or goes bankrupt, the creditor can sale the pledged property and collect his debt. The agreement written and signed between the debtor and creditor in this process is known as the mortgage deed.
Difference between Mortgage Deed and Promissory Note:
When an individual borrows money from another person on personal basis, they don’t need to sign a legal loan agreement but they can also use a promissory note. In the promissory note, the borrower states that he has in fact borrowed a certain amount of money from the mentioned person and he is willing to pay back the debt as soon the creditor or lender makes a formal demand. In this process, there is always good chance that the debtor won’t return the money due to many reasons and as there is no guaranty, the creditor won’t see his money again. Unlike the promissory note, the mortgage deed is secured by the pledge of a piece of property with the creditor and if the debtor denies paying back the debt, the creditor has the legal right to sell and collect his debt.
Benefits of using Mortgage Deed:
There are many benefits and advantages of using mortgage deed over simple loan agreement but the most important benefit of this deed is that there is enough guaranty or assurance for the creditor that he doesn’t need to worry about the debtor running away or going bankrupt. In particular situation, if the debtor does go bankrupt or denies paying the debt back, the creditor has the opportunity of selling the pledged property and rearranging his debt without going after the debtor or introducing a mediator or third party in the deal.
Key elements to include in the Mortgage Deed:
- Name of the person who is the actual owner of the property with complete address
- Name of the person who is lending money to the owner with complete address
- Date when the mortgage deed is being prepared and signed
- Details of the property being pledged as collateral in the deed
- The availability of the ownership documents (i.e. with actual owner or the creditor)
- Details of money borrowed by the debtor
- Details of the payments for return of the loan with dates and periodic payment schedule (if applicable)
- Terms and conditions of the mortgage deed
- Validation, expiration and termination of the mortgage deed
- Signature of both parties with witnesses
Here is preview of a Free Sample Mortgage Deed Form created as fill-able PDF form,
Here is download link for this Mortgage Deed Form,