What is a mortgage deed?: a guide for new buyers

If you’re buying your first home, you will most likely hear the term ‘mortgage deed’ pop up a few times. It’s normal for you not to understand what this means off the bat; after all, there’s only so much you can take in at once. 

However, if there’s anything you need to understand, it’s what a mortgage deed is. When you go through the mortgage application process, you will need to sign a legally binding contract to secure a mortgage against your assets. 

Today, GMS Ltd will walk through everything you need to know about this legal document so you feel confident answering the question, ‘What is a mortgage deed?’. 

As a new homeowner, understanding every aspect of the mortgage process can feel overwhelming and impossible without the right support. That’s why GMS is here to provide you with expert, unbiased mortgage advice, whether you’re a first-time buyer or you’re remortgaging. 

What is a mortgage deed?

A mortgage deed is a legally binding document that you sign to grant the lender a legal charge over the property as security for the loan. 

In simpler terms, it is a written confirmation that you are entering into a legal contract with your mortgage lender or provider and that the mortgage is secured against the property. When you sign it, you are agreeing that the property can be used as security for the loan.

From this, the lender has the right to reclaim the property if repayment obligations are not met. Since the lender takes out a charge against your home when you take out a mortgage, they have the right to repossess the property and sell it if you breach the contract. This is what’s known as the legal charge. 

Don’t worry; your home won’t be repossessed if you miss one payment. However, the deed allows the lender to seek a court order to repossess and sell the property if you continue not to pay.

Why is a mortgage deed required by law?

A mortgage deed is enforced by two main laws:

1. Law of Property Act 1925: outlines the legal principles for land ownership and mortgages, including the framework for legal and equitable interests, and clarifies rights such as those under mortgages and leases.

2. Land Registration Act 2002: Requires mortgage deeds to be registered with HM Land Registry for a complete, authoritative register of title. 

   
   

These two laws essentially require that a mortgage deed be recognised by law to be valid and legally binding. That’s why it’s so important to seek legal advice from a mortgage advisor instead of trying to handle everything by yourself as a new buyer.

What does a mortgage deed include?

A mortgage deed is typically a one or two-page document that a mortgage lender will require you to sign. It will include a unique reference code linked to your property and identifying you as the buyer. 

Contained will be all of the details concerning the terms and conditions of the borrowing agreement, including:

• Loan details—such as interest rates, loan amount, and repayment schedule.

• Redemption clauses—clauses about arrears, default interest, the lender’s ability to add certain costs to the balance, and enforcement rights.

• Legal charge—outlines the lender’s security over the property, recorded at HM Land Registry until the loan is repaid.

• Security details—names the borrower(s) and lender, identifies the property by full address and Land Registry title number, and states any assets you’ve put forward as collateral. 

• Insurance and maintenance—states your obligation to keep the property in good condition and how you’re required to ask for permission before completing any building work or renovations.

• Rights of possession—hands the rights to the lender to legally repossess and sell your home if the contract terms are breached, such as missing repayments. 

  
  

Why is a mortgage deed important?

A mortgage deed protects both the buyer and the lender. 

As a borrower, you want to know that you understand the terms and conditions of the mortgage thoroughly before signing. Doing so will mean you don’t breach the terms by accident and find yourself in legal trouble. 

The mortgage deed sets out what you’re expected to pay, the time period for repayments, and the interest rate, which varies between mortgages. A mortgage advisor will make sure that you enter a contract that meets all of your needs, so you don’t struggle with the costs and time limits. 

For the lender, the mortgage deed serves as a safety net in case borrowers don’t repay on time. Without a correctly signed and witnessed deed, lenders won’t send the money to your solicitor, so even if everything else is ready, the purchase can’t be completed. 

Getting the deed right avoids registration errors that can cause delays, requisitions from HM Land Registry, and headaches when you come to sell or remortgage.

What you should consider before signing

Before signing your mortgage deed, your solicitor will go through the mortgage offer with you and make sure everything is correct and meets your requirements. 

They will point out anything of interest or concern so you can understand what you’re entering into before sealing the deal. Before adding your signature, check the following.

1. Make sure every name, address and title number matches your ID and the mortgage offer.

2. Check that a reliable witness (that isn’t a family member) is present to watch you sign the contract.

3. If you’ve switched products, rates, or terms since the first offer, confirm the deed aligns with the latest documents.

4. Know your start date, monthly payment method, and when interest is charged.

5. Look at the requirements for building insurance and confirm the sum insured, the start date, and whether the lender must be noted on the policy.

6. Check any special conditions, such as gifted deposits, source of funds, or extra documents to sign.

   
   

How to sign a mortgage deed

Besides having a reliable witness in place who can testify to your character and confirm that you are who you say you are, everyone entering the agreement needs to add their signature. 

If you’re entering the mortgage with a partner, friend, or family member, they will also need to be present and sign the deed for themselves. Mortgage deeds can be signed on paper or digitally. 

Before signing the deed, ask whether your lender and conveyancer want a wet-ink signature with a witness present or a qualified electronic signature. The witness can be a solicitor, colleague, or neighbour, as long as they’re not related to you and are over 18 years of age.

What happens if you fail to comply with the mortgage deed?

If you fail to comply with the mortgage terms and miss a few payments in a row, the lender will issue a court order to repossess and sell your home, then use the sale proceeds to clear what’s owed (also known as foreclosure).

If the sale doesn’t cover the full balance, the shortfall can remain payable.

Get help with signing your mortgage deed

Now that you understand more about what a mortgage deed is and why it’s important, GMS Ltd solicitors can help you sign your mortgage deed with confidence, as well as help you throughout the entire mortgage application process.

Our advisors will make sure everything is as it should be and break down every part of the process so you’re always aware. Speak to our mortgage brokers today for friendly, unbiased mortgage support. 

Contact us on 0151 230 0909.