Your Mortgage Debt Is Secured Against Your Home

Your mortgage debt will be secured against your property once the loan has been advanced.

In any developed nation worth the name, laws protect property rights. This is one of the basic elements of any functioning economy and nation.

As such, lenders wish to protect their rights over your property by registering their interest. Details of the mortgage debt owed will be noted on the register. In the UK, for example, this register is operated by HM Land Registry and is simply called the property register.

These details will not be removed until the outstanding balance is repaid. This will prevent the owner from transferring the property to another person (ie selling it) until the lender agrees. As you might imagine, this is very effective security for a debt.

It is this extra legal protection, which is not available to credit card or personal loan lenders that enables the major financial institutions to offer such competitive deals.

However, this extra protection does not mean that lenders are free and easy with their lending policies. To purchase a property, the size of the mortgage debt is usually quite considerable and so the bank and it's money is on the line. They will scrutinise your application form and credit score results for any hint of financial problems.

Many times, a lender will spot a potential problem and still lend. In these circumstances though, a higher interest rate may be charged to compensate for the additional risks. This is often known as a rate loading.

It is worth pointing out that additional mortgage lending - with the same or a different lender - will also be noted on the property register. This means that a borrower may owe money to perhaps three different lenders in total and they will all note their interest.

As might be expected, the lender who loaned money first will usually have priority rights in the event that the property is sold after a loan default. There are circumstances in which this is not the situation, but they are likely to be very rare.