When the borrower and lender agree on criteria that satisfy both parties, it is important that they follow duties and covenants. The borrower has four financial obligations and the lender has two as follows:.
As lenders have a large interest in the maintenance and preservation of the mortgaged property, the borrower’s covenants assure the lender accordingly. The mortgage contract obligates the borrower to the following:
1) Repay the loan amount
Repayment of the loan refers to repaying the initial debt and the accumulated interest.
2) Pay property taxes
The government and local municipality have a priority over the mortgage as a charge against the property. For this reason, lenders must ensure that the property does not fall into owing. To prevent this, many lenders pay property taxes on the borrower’s behalf and charge the borrower with an additional monthly payment accordingly. This can be beneficial for the borrower as he/she may be able to make monthly payments of property tax, rather than a lump sum.
3) Pay property insurance
The borrower is responsible to insure the property against fire and other hazards to the full insurable value of the security.
4) Maintain the property
The borrower is responsible to maintain and repair the property in such a manner that will preserve its value. This ensures the lender that the value of the property will not fall below the outstanding mortgage amount.
As the borrower still maintains an ownership in the property, he/she has interests against the lender accordingly:
1) Discharge the mortgage upon full repayment
This ensures the borrower that once their debt has been repaid, the property is in fact completely theirs.
2) Leave the borrower in a state of quiet possession
This ensures the borrower that they will be able to enjoy and fully use the mortgaged property, without the interference of the lender.
For a more in-depth and professional review of your individual and personalized situation please give Harpreet Singh The Mortgage King a call at (416) 795-1919.