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Mortgage by Demise

A mortgage, in simple terms is the legal transfer of an interest in property, or its equivalent in law to a lender to act as collateral for a debt – normally a loan extended in form of money. Note that the mortgage itself isn’t a form of debt but it’s the security of the lender for the debt that the borrower is looking to secure. As such, a mortgage can be understood as a transfer of an interest of collateral such as land or an equivalent from the owner of the collateral to the mortgage lender, on conditions that the interest will be returned to the owner once the full terms and conditions of the mortgage have been fulfilled. In other words, the mortgage is collateral in favor of the lender such that in case the borrower fails to honor the loan terms, the lender will not be at any risk as they can seize the mortgage and recover their money.


There are fundamentally two types of legal mortgages – mortgage by demise and mortgage by legal charge. In mortgage by demise, the lender, otherwise known as the mortgagee in this case becomes the rightful owner of the mortgaged property until the time that the loan will be repaid in full, or until the time that the mortgage obligations will be fully fulfilled by all concerned parties. Mortgage by demise normally takes the form of transference of the property to the creditor, but of course with the condition that the property has to be returned upon redemption.

Mortgages by demise were the initial form of mortgage to be used, and some jurisdictions continue to use it up to date. However, it’s getting abolished or its usage minimized as days advance and new and better ways of servicing a mortgage by securing both the creditor and the borrower are devised.

Mortgage by legal charge
There is a very huge difference between a mortgage by demise and a mortgage by legal charge. In the latter, the loan borrower retains full ownership rights of the property, but the creditor has enough rights over the property to enable the creditor enforce their security, like the right to seize and sell the property incase of a default. As further security to the creditor, a mortgage by legal charge is normally put in record on a public register.


Because mortgage debts are normally the largest of debts in many jurisdictions, banks, lenders, and various other mortgage lending institutions conduct a title search of the real property to ensure that there are no mortgages that have already been registered on the debtor’s property which would mean that the debtor will get higher priority.

The mortgage by demise will at first appear like a standard lease as it’s granted for a particular period after which the collateral reverts back to the borrower. Initially, there were rents payable to the borrower at specified times of the year and at other times services were carried out for the borrower. The rent payment will however not be a real payment but just a nominal sum.

Tags: advance, bank, collateral, credit, law, Legal, loan, money, mortgage, risk

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