There are 2 types of mortgages: a) Legal mortgages, or b) Equitable mortgages (remember a loan is not a mortgage and a mortgage is not a loan. A mortgage is a form of security for a money lent see Legal Tip 118: Loans and Mortgages are not the same thing! Legal Tip 118: Loans and Mortgages are not the same thing! ) Today we turn to equitable mortgages. These are unregistered mortgages that are recognized and enforced by a branch of law known as ‘equity’. They must still be in writing and signed by the parties, s 23C Conveyancing Act 1919 (NSW). The written agreement must grant a mortgage or charge over an asset and this charge creates the equitable interest in the asset to the mortgagee. Handing over title to a property can be considered an equitable mortgage too, even without the written requirement. s 23C Conveyancing Act 1919 (NSW). CONVEYANCING ACT 1919 - SECT 23C Instruments required to be in writing If the equitable mortgage is registered on title it would then be a registered mortgage or a legal mortgage. It is the unregistered nature which makes it an equitable mortgage
Hi Terry, do you have any examples of this type of mortgage in real life? Are there any cases where this has caused issues to property investors or developers?
Many people borrow money on top of what they might owe to a bank and give a second unregistered mortgage. Some use unregistered mortgages for asset protection strategies, some mezzanine finance is unregistered mortgage with a caveat lodged to help with priorities. They are fairly common.
