If you borrow money under a mortgage, your most obvious and important obligation is that you must repay both the principal amount borrowed and the interest.
The mortgagee (the bank or finance company that lends you the money) is entitled to charge interest on any money advanced. There is no legal limit on the rate of interest that may be charged; the interest is normally a matter to be agreed on between you and the mortgagee.
Under the Credit Contracts and Consumer Finance Act 2003 a mortgage contract can be re-opened by the court if one of its terms is oppressive or if the mortgagee acts oppressively (see How to get out of a loan contract, credit sale (hire purchase agreement) or other consumer credit contract). But a high interest rate will not in itself be a ground for re-opening the contract: in general there will need to be some other element before the court will intervene, such as an unequal bargaining relationship between you and the lender, or an additional agreement attached to the loan agreement (see also "Mortgagees entitled to no more than full repayment" below).
As a mortgagor you have the right to repay the mortgage, either:
This right is known as the "equity of redemption", and the mortgagee is not permitted to "clog" your right of redemption. This means that the mortgagee is not allowed to prevent the early repayment of a mortgage.
Further, a mortgagee may not attempt to gain some additional advantage from you other than full repayment of the loan principal and interest, and costs and expenses. Therefore if the mortgage transaction includes some other agreement giving the mortgagee a further advantage â€“ for example, that you will buy certain goods from the mortgagee and from no-one else â€“ that other agreement will be void.
The mortgagee is also not entitled to include in the mortgage agreement an option to buy the property concerned.
If you default in making your mortgage payments when they are due, by law the mortgagee has a series of rights that it may exercise. Ultimately the mortgagee will wish to recoup the money it is owed, and this is usually achieved by exercising its power of sale under the PROPERTY LAW ACT 1952.
Before the mortgagee can take any action to sell the property, it must issue you with the proper notice under section 92 of the PROPERTY LAW ACT 1952 (see How to defend a mortgagee's right to power of sale).
This notice must set out:
The date specified must be at least four weeks from the date on which the notice is given. But if the mortgage contract specifies a period for this that is longer than four weeks, the date specified in the notice cannot be earlier than the end of that longer period.
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