How to Write a Mortgage Contract
What is mortgage? It is the property used for securing the loan amount through the use of a mortgage note that confirms the existence of the loan. Loan is required for satisfying the immediate needs of the individual or family. The lender makes a contract with the borrower for the existence of the mortgage loan. There are many mortgage companies that are providing the mortgage loans for different purposes charging nominal interest rates. If you are starting a mortgage company, it is important that you should know how to write the mortgage contract. You should have knowledge of all the terms involved in the contract. The information presented in the article will help you in achieving this purpose.
The mortgage contract is the legal document between the borrower and lender that describes what the mortgage is for, how it proceeds and what will be the effect if the borrower is unable to pay back the loan amount along with the decided interest rate on time. The loan providers and real estate agents make these mortgage contracts at the time of property sale or money lending time.
Writing a Mortgage Contract
Following are some tips that should be followed while writing a mortgage contract:
- Mention the official title at the top of the document. Also write the date of agreement on one side of the document. Start with who the loan agreement is in between and describe the list of borrowers followed by the lender. Do mention the designation i.e. "Borrower" and "Lender" before the name of each party.
- Start with the definitions section of the contract paper. This section will include the explanation of the terms used in loan agreement. Here you will have to specify the terms
like Access laws, deposit, default rate, and allocated loan amount. These terms will vary from lender to lender and depend on whether the contract is made for commercial or residential property.
- The next section will be the warranties, covenants and borrower's representations. This section will describe the borrower's rights under this mortgage contract. It will also mention the warranties that are included under this mortgage agreement.
- Next section describes about the general loan terms and conditions. It will explain exactly what type of loan is it and what are actual loan documents drafted. It will provide the information of the types of title policies, lender inspection report and insurance information as the art of the contract.
- Pledge of borrowers - This section will include the financial information of the borrower related to the mortgage taxes, liens, leasing policies and accounting details. It will also state the details of the legal actions and inspection policies for commercial properties.
- Agreement to Lend - This section will describe the rule and regulations involved in the incomplete release of the loan.
- Insurance and Casualty - This section will include the details of the insurance coverage and casualty condemnation clauses.
- Borrower's Default - It states the information of the legal action to be taken against the borrower if he/she fails to pay back the loan amount.
- Miscellaneous Section - The information of the transfers and waivers will in included in this part of the contract.
Hope the above details will help you to make an effective loan agreement. Following the above tips you should include all the necessary information and terms and policies in your agreement letter.