Mortgage deeds

A mortgage is a contract by which one party, called the lender (usually a bank), transfers a certain amount of money to the other, the borrower, in order that it may enjoy of it for a specified period, against payment to the lender of an interest-bearing consideration.

Thus schematized the essential structure and function of the contract, it must immediately be pointed out that a mortgage in concrete is enriched with several clauses not always of immediate understanding, but necessary to regulate all relations between the parties for the expected duration: mortgage disbursement method, setting the time limits for repayment of the principal amount and payment of interest, determination of more costs for the administration of the contract, early termination rules and costs, provision and maintenance of guarantees, consequences of relative (delays) and absolute (non-payment) defaults. Each of these aspects is in turn characterized by a considerable wealth of possibilities and nuances, fruit of both modern practices and rules, as well as a doctrinal meditation that can be rightly defined as millenarian (the mortgage is contemplated in classical Roman law and has been studied by Byzantine jurists, medieval jurists of common law, modern-day codification jurists). Currently the theme is further enriched by suggestions and news from foreign Countries and the discipline of the European Union. All this gives an idea of the actual complexity: the mortgage contract, a typical product of an intellectual activity, is well suited to be conceived as a legal engineering composition, where the work of constructing, sizing and coordinating the various clauses characterizes the result as a whole, and makes it possible to evaluate it in terms of better (or worse) quality and cost-effectiveness.

Mortgage contracts are generally arranged by banks; the Notary, if appointed in time by the borrower, may exercise control over them, in order to make them clearer and more comprehensible, to identify and suggest solutions better suited to the contractors, to eliminate clauses that can create an unjustified contractual imbalance.

If the basic structure of the contract is the one indicated, it can happen, quite often, that the mortgage is concluded according to a special discipline, the "land credit" one. Today this discipline is very little different from that of an "ordinary" mortgage, even being discussed among experts when you are in the presence of one or the other; however, there are significant differences, some of which will be highlighted in the following  factsheets. On the contrary, the so-called “unilateral mortgage”, which has become widespread in recent practice, is not a particular species. The only difference is that the only person to go to the Notary ( indispensable for the granting of the mortgage guarantee) is the borrower: this perfecting mode  may, in practice and depending on the case, reduce the notary’s scope for his function of guidance and advice.

It's necessary to draw attention to an essential point right now. The mortgage is not always immediately followed by the availability of money: banks sometimes hold the sum until the actual acquisition of the mortgage guarantee, even for a fortnight (or more) after the deed signing. This is very important because the borrower often needs to dispose of the money immediately, to pay the seller the house that simultaneously grants as guarantee to the bank! A possible remedy is to get a "pre-financing" from the bank, to cover the period between the conclusion of the mortgage and the time needed to consolidate the guarantee; but not all banks are available for this. The Notary may be consulted to try to reconcile as far as possible the conflicting requirements. The Notary may try to reconcile as far as possible the conflicting requirements.

Other warning concerns a possible aspect: the borrower may expect that the property purchased, and granted in mortgage, must be soon resold for various needs (transfer of residence, increase in the number of family members with a need for a larger home, etc.); consequently he considers the possibility to charge, in account price,  the future new buyer of the property the part of the mortgage remaining to be paid. Apart from the fact that 1) the buyer must also agree on the assumption, and that 2) sometimes the banks put some obstacles to the transaction, it is especially important to remember that, as a general rule, 3) the assumption is not "liberating", but "cumulative": this means that, once the residual mortgage has been taken over, the bank does not change the borrower but acquires an additional one; so, if the new buyer fails to pay the bank, the bank may still make claims against the original borrower. For these reasons, the current practice is to make less use of the assumption: In essence, the seller pays off his mortgage while the buyer, if necessary, takes on a new one of its own. The Notary can also help in this respect, by highlighting concrete alternatives and their costs                                                     

taken from www.notariato.it