Hypothecation Title Theory: Setting the Terms

If you want to take out a mortgage, then you might be considering hypothecation. This is a type of mortgage which involves setting the assets (in this case your home) against the loan. In title theory, this is secured by giving the lender the title to the property, which is then held in trust by a third party. The title remains with the lender until the mortgage is paid off. During the negotiations, it is important to state any terms that you want included in the mortgage agreement.

The Borrower

Although it is still common practice for the lender to hold the title, it is now also common for the borrower to still be seen as the owner of the property. You should make this clear in the title deeds for the property, and you should also ensure that you are able to claim rights if anything does go wrong with the mortgage.

Payment Defaults

The borrower can also make a request for time to pay off any defaults that may occur on the mortgage. Although they may be sure that they can manage the hypothecation mortgage, if anything does go wrong, it is a good idea to have some measure of leeway to ensure that it is working correctly.

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