Registered Mortgage vs. Equitable Mortgage: What’s the Difference?
When purchasing a home, most people rely on a mortgage loan to finance the purchase. A mortgage loan is a type of loan where a lender provides a borrower with the funds needed to buy a property, and the borrower agrees to repay the loan over a specific period. There are two types of mortgages in the UK: registered and equitable. This article will explore the differences between these two types of mortgages and what they mean for homeowners.
What is the Difference Between a Registered Mortgage And an Equitable Mortgage?
Registered Mortgage:
A registered mortgage is where the lender registers a legal charge against the property with the Land Registry. It means the lender has a legal right to take possession of the property if the borrower fails to repay the loan. In other words, the lender has a priority claim over the property. If the borrower sells the property, the lender will be paid before other creditors. Additionally, if the borrower defaults on the loan, the lender can seek repossession of the property and sell it to recover the outstanding debt.
Banks and other financial institutions usually offer registered mortgages, the most common type in the UK. When applying for a registered mortgage, the lender will carry out a credit check on the borrower. The borrower must provide proof of income, employment, and other financial details. The lender will also conduct a property valuation to determine its market value.
One of the advantages of a registered mortgage is that it offers greater security to the lender. Because the lender has a priority claim over the property, they are more likely to offer lower interest rates and more favourable repayment terms. However, the downside for the borrower is that they may need to provide a larger deposit upfront, and the application process can be more complicated and time-consuming.
Whether you are looking for a registered mortgage or an equitable mortgage, working with a mortgage broker in London can help you find the right loan for your needs. A mortgage broker is a professional who specialises in helping people find the right mortgage for their circumstances. They work with various lenders, including banks, building societies, and private lenders, to find their clients’ best mortgage rates and repayment terms.
Mortgage brokers can offer valuable advice and guidance throughout the application process, helping borrowers to understand the different types of mortgages available, the pros and cons of each type, and the eligibility criteria for each lender. They can also help borrowers prepare their applications, including advising on improving their credit scores and presenting their financial details in the best possible light.
Also Read: Key Questions Your Mortgage Advisor in London Will Ask You
Equitable Mortgage:
An equitable mortgage, on the other hand, is a type of mortgage where the lender does not register a legal charge against the property. Instead, the lender depends on the borrower’s commitment to repay the loan. If the borrower defaults on the loan, the lender can still seek repossession of the property, but they must prove their claim in court. It can be lengthy and costly, and the lender may compete with other creditors to recover their debt.
Equitable mortgages are typically offered by private lenders, such as friends or family members, and they are less common than registered mortgages. Because there is no legal charge against the property, equitable mortgages are usually only offered for small loans. The interest rates are generally higher than those banks and financial institutions offer.
Mortgage brokers can offer valuable advice and guidance throughout the application process, helping borrowers to understand the different types of mortgages available, the pros and cons of each type, and the eligibility criteria for each lender. They can also help borrowers prepare their applications, including advising on improving their credit scores and presenting their financial details in the best possible light.
Also Read: How Much Deposit Do You Require for a Mortgage?
Conclusion:
In conclusion, choosing the right type of mortgage is an important decision that can significantly impact your finances. A registered mortgage is a legally binding document that provides more protection to the lender than an equitable mortgage. An equitable mortgage is an informal agreement between the borrower and the lender based on the principle of equity. When choosing a mortgage, it is important to work with a mortgage broker in London who can help you navigate the complex process of applying for a mortgage and find the best options.
At Mountview Financial Solutions, we are committed to helping our clients find the right mortgage for their needs. We understand that every client is unique and we work closely with you to understand your circumstances and requirements.