Checking your mortgage deed
The time has arrived! Your mortgage has been approved, and you are about to head to the solicitor and sign the mortgage deed. But what exactly are the contents? And what should you pay attention to among all that legal jargon? This article explains your mortgage deed in detail.
You should have received a draft of the mortgage deed from the solicitor to read at your leisure before you pay a visit to their office. However, sifting through the deed can sometimes be a daunting task.
General provisions
It’s good to know that the majority of the mortgage deed consists of general provisions, which the lender has incorporated within it. In a nutshell, these state that your mortgage repayments must be made every month, along with the consequences if you fail to make the required repayments. However, if the mortgage is always paid promptly, there shouldn’t be any problems. The solicitor will briefly run through these provisions with you before you sign the deed.
Specific provisions about you and your mortgage
In addition to the general section, there are of course provisions in the deed that apply specifically to you and your mortgage. We will explain these clauses below.
1. Your personal details and the lender’s details
The beginning of the deed includes what is referred to as the ‘appearance clause’. This is where the parties who have entered into the agreement are named, meaning the lender, you, and your partner, if any. Your full name, date of birth, place of birth and address details are stated here. The solicitor obtains this information from the Key Register of Persons (Basisregistratie Personen, BRP).
The details of your proof of identity are also set out here. Check this information to see if it is correct. Does the solicitor have your proof of identity, and is the information current? If not, tell your solicitor so they can correct any necessary details within the deed.
2. Details of the collateral
It goes without saying that the details of the collateral, i.e. the property on which the mortgage is to be established, must also be provided. In addition to the address of the purchased property, the Land Registry details are also stated. It is the solicitor’s responsibility to ensure that the Land Registry details are correctly listed in the mortgage deed.
Make sure that all collateral is mentioned in the deed. Along with the house (or apartment), you may also be buying a parking space, storage facility, or plot of land with its own specific land registry code. The lender often wants to establish a mortgage right on these separate parcels too (unless otherwise stipulated). It is therefore important that these are also mentioned in the mortgage deed.
Bridging loan
The same principle applies to the bridging loan. A bridging loan also temporarily establishes a right of mortgage on your current home, as additional security for the lender. In return for this, you are granted a temporary additional sum to borrow. When the transaction on your current home is completed at the solicitor’s office, this bridging section of your mortgage loan is paid off. If you take out a bridging loan, the deed must also contain the Land Registry details of your current home. A temporary right of mortgage is then established on this property. This mortgage will rank below the mortgage you may already have on your current home.
3. The amount of the loan
This is the amount you actually borrow from the lender. Often, this is also the amount that the lender transfers to the solicitor, but there are exceptions. If there is a deduction (for example, for a home improvement account, National Mortgage Guarantee or a commitment fee), these amounts will not match exactly.
Any deductions from the loan are usually not reflected in the mortgage deed. You will find them on the completion statement (see below), which you will receive from the solicitor.
4. The mortgage deed
The mortgage deed states the amount for which the mortgage is filed with the Land Registry (Kadaster).
Increasing use is being made of what is referred to as ‘increased mortgage registration’. The amount of the mortgage (also called ‘mortgage registration’) in the deed is always increased by a certain percentage, regardless of whether an increased mortgage registration is incorporated. This percentage varies per lender, but is often around 40% – making it appear as if you suddenly have a much higher mortgage debt than agreed. Just to put your mind at ease, this is not actually the case. Let us illustrate this with an example:
Calculation example of an increased mortgage registration
Let’s use an example of a mortgage loan of € 300,000, with a Land Registry entry of € 400,000. This entry is increased in the deed by an amount of 40% (i.e. € 160,000) to € 560,000.
Why is this mentioned in your mortgage deed in this manner?
If you fall into arrears concerning your mortgage repayments over a long period of time, your debt will increase. The lender will incur extra costs to get you to pay the mortgage repayments you owe, such as the costs of a penalty charge, interest or even enlisting a bailiff.
Naturally, the lender does not wish to incur these additional costs themselves, and would in such cases be looking to recover the costs through the proceeds of a foreclosure sale of the property, in priority to any other creditors. This priority is defined within the mortgage deed, and can never exceed the amount stipulated in the deed. In our example, this would be
€ 560,000.
Usually, however, this is a scenario that lenders will avoid, as they would sooner opt for intervention and foreclosure (forced sale) on such properties.
5. Loan details
Loan details mean the terms and conditions of the loan: for example the duration, the interest rate, the fixed-rate interest period and the annuity amount of the loan segments. In some cases, however, these conditions are not defined within the mortgage deed. This is lender-dependent. Many lenders tend to refer to the ‘general terms and conditions’ or the ‘binding offer’.
If this is referred to in the deed, then you will not have to seek out the specific loan details in the deed. In such instances, the lender has opted to have you sign the offer (containing all conditions) again at the solicitor’s office. This offer, signed by you, is then attached to the mortgage deed, and is kept in a safe at the notary’s office, together with the deed documents.
If the loan details are listed in the deed, then you can check whether they correspond to the interest rate offer and/or the binding offer you signed via your mortgage advisor.
6. Completion statement
Last, but not least is the completion statement. This is an overview of all the costs that are charged through the solicitor, or settled with the seller. The most important thing on the completion statement is the amount on the bottom line. This is the amount you need to transfer to the solicitor’s third-party bank account (before completion), or the amount you will receive if you are selling a house (two working days after completion of the deed(s)).
It is essential that there is evidence that this amount is in the account of the solicitor at the time of transfer. If it is not, then the solicitor cannot and may not execute the deed. So be sure to transfer any outstanding amounts on time!
Your own capital
During the advisory process, your advisor prepared a financing plan, which states approximately how much of your own capital needs to be brought into the solicitor. Be advised that this is an estimate. Your advisor is not able to know the exact amount in advance, as this depends, for example, on whether or not you have enlisted an estate agent, on the solicitor you have selected, and on any settlements on the completion statement between you and the seller of the house (for example, the annual owner overheads and any service charges that may be payable to the residents’ association).
You can check the completion statement to find out if the mortgage amount is correct, and if the amount to be paid (or received) is broadly in line with what was stated in the financing plan. Have you chosen to transfer the deposit amount to the solicitor yourself? If so, this already forms part of your own capital that you will be contributing.
Any questions? Feel free to ask!
Any questions about the completion statement can be put to the solicitor, who has all the necessary information on file, and can explain the reason why certain amounts are charged or what certain figures or charges represent.
Do you have questions about the mortgage amount, or about the costs that have been deducted (such as the National Mortgage Guarantee (NHG) costs or the commitment fee)? If so, you can always contact your Viisi mortgage advisor. We are also happy to help if there is anything you’re not quite sure of that’s in the mortgage deed. Your advisor will then take a look and provide you with answers, along with peace of mind about your mortgage.