What is a Mortgage Contract?
Mortgage contracts are regarded as perhaps the most important contracts in a person’s life next to a marriage contract. As these contracts are important, and large sums of money are being exchanged, it is vital that a solicitor or lawyer draws up the mortgage contract. Mortgage contracts are one of the very few circumstances where the details must be written down in a legally binding contract.
Basic Mortgage ContractsWhen you enter into a mortgage contract you are basically dealing with a variety of different parties. A financial lending institution such as a bank or building society that will be lending you the money to buy a property. A solicitor who will be dealing with the sale and the party that is selling the property.
You may not actually deal with the selling party as this will usually be processed through estate agents and solicitors. However, the exchange of contracts will be one of the most important parts of the process, and a solicitor will be needed to complete the transaction.
Terms and ConditionsThe terms and conditions of most mortgage contracts will vary depending on the type of mortgage, the interest rates and any mortgage insurance policies. They will also differ in regards to deposits and fees, and the type of properties being purchased. For instance, council buy-to-let properties have certain conditions and waiting periods set into the contract before the buyer can sell.
Mortgage contracts are regulated by the Financial Services Authority (FSA). The regulations are set in place for the protection of the consumer to ensure that they are treated fairly by financial institutions. The FSA is a government body and sets the standards that financial institutions must adhere to.
The Basic ProcessThe process involved in the buying of property and mortgages is that the buyer will decide on the property they want to buy and then fill out a mortgage application form. Once all financial checks on the buyer have been made, and if they are satisfactory, and property valuations are also approved then the buyer will receive the mortgage offer.
The Mortgage OfferThe mortgage offer will come in the form of an official document that sets out the agreement between the lender and the buyer. A solicitor can look over all of the terms and conditions of the mortgage offer and then if they are agreeable the buyer will sign the offer and return it to the lender. The funds will then be ready for release when the time comes to purchase the property.
The Conveyance ProcessConveyancing is a legal process that will begin once the mortgage offer is in place. The solicitor will begin to investigate the property and make sure that the person selling the property is legally entitled to do so. If everything is in order then a contract will be drawn up to enable the buyer to purchase the property at the price that was agreed and with all details intact including details on fittings and the like. Included in the contract will be the completion date; this is the date from when the property will legally belong to the buyer.
Completing the DealA solicitor will be the one that ensures that the mortgage contract and the purchase funds and any deposits are in place in time for the completion date. Stamp duty may or may not also be required depending on the price of the property. Again, the solicitor will be the one that deals with any stamp duty procedures.
Anyone that is considering entering into a mortgage contract should ensure that they take expert financial advice. First time buyers need to be aware of the penalties for missing mortgage payments, and also their rights regarding eviction and repossession. Never sign any contract until 100% sure that the mortgage payments can be met, and that all the terms and conditions of the contract are fully understood.