Mortgage law & policy

In English property law, what does a 'mortgage' fundamentally create for the lender?

• AA right for the lender to occupy the property immediately
• BA charge over the property as security for the loan✓
• COutright ownership of the property transferred to the lender
• DA right to sell the property at any time without process

Answer: A mortgage creates a charge (security) over the property; legal ownership remains with the borrower. The lender's rights, including possession and sale, are subject to legal process and protections.

What is the term for the borrower's right to redeem the mortgage and have the charge removed once the debt is repaid?

• AThe equity of redemption✓
• BThe covenant of quiet enjoyment
• CThe right of foreclosure
• DThe deed of priority

Answer: The equity of redemption is the borrower's right to clear the debt and free the property from the lender's charge. It cannot be unfairly fettered (no 'clog' on the equity of redemption).

What is a 'first legal charge' on a property?

• AA charge that ranks behind the other lenders' charges secured on the property
• BThe primary security interest that takes priority over later charges✓
• CA charge held by the local authority in respect of unpaid council tax bills
• DA charge that applies to leasehold titles rather than freehold titles

Answer: A first legal charge ranks ahead of subsequent (second and later) charges, giving that lender first call on the sale proceeds. Most main residential mortgages are secured by a first legal charge.