The purchased property has a mortgage; what you can do with it and what to avoid under all circumstances | Business

“When buying a more expensive property – a house or a car – we pledge it as collateral for a creditor. Sometimes collateral is needed when lending a larger amount of money, for example, for home repairs. This is a commitment to the creditor that the borrower will comply with the terms of the loan repayment.

Legally, the mortgaged property belongs entirely to its owner, who are its landlords, but there are still rumors that the mortgaged property belongs to the bank. Therefore, sometimes, due to ignorance, certain misunderstandings arise, so it is very important to understand your rights, duties and responsibilities as property owners, so that misunderstandings do not turn into problems”, emphasizes the Citus expert.

What is important and convenient mortgage

When buying property, the lawyer explains, a mortgage contract is usually concluded. This concept is also not clear to everyone and the specialist says that it is a contract with additional and specific conditions, some of which are important and useful for the buyer who borrows money and pledges property.

Officially, a mortgage is a real right to someone else’s immovable property, which ensures the proper fulfillment of an existing or future property obligation, when the pledged property is not transferred to the creditor. The mortgage agreement ensures that if the borrower defaults on the agreement, the creditor will have legal means to recover the money.

“Simply speaking, a mortgage agreement is a promise by the borrower, like a “guarantee” to the creditor, to fulfill all the conditions agreed in the credit agreement. A mortgage contract is concluded only in case of real estate pledge and is registered in the public register. It used to be called the Register of Mortgages and now the Register of Contracts and Encumbrances, managed by the Register Centre.

In the register center’s self-service, it is possible to find information about concluded and registered mortgage or pledge agreements. Basically, it is a debt security system established by law, which simplifies the resolution of conflicts between the borrower and the creditor, because there is no need to go to court for debt repayment – an executive record issued by a notary is sufficient, which has the power of an executive document. In addition, this system also protects borrowers”, explains I. Pukelienė.

First of all, as stipulated in the Civil Code of the Republic of Lithuania, the creditor cannot unjustifiably enrich himself at the expense of the debtor, and the latter has the right to demand coverage of losses if the debtor incurs them after the creditor has started an illegal collection or an illegal forced sale.

Also, the mortgage does not prevent, if the credit agreement allows, early repayment of the loan – after fulfilling the obligations of the credit agreement and completing it, the mortgage will also end.

In general, a mortgage does not take away or change the right of the owner of the mortgaged property to manage, use and dispose of the property in accordance with the rights of the mortgage creditor – the owner can transfer the property to another person, re-mortgage, lease or donate it.

In case of sale, the debt to the creditor is usually covered from the received funds, but the owner, in agreement with the creditor, also has the right not to repay the debt, but to transfer it together with the mortgage to another person (the new debtor), who agrees and takes over the debtor’s obligations to the creditor in accordance with credit agreement.

Another convenient nuance – the object of the mortgage can also be a part of real estate, such as a parking space or part of a plot of land, if the value of the property is sufficient to secure the obligations. In this case, the property owner does not need to mortgage the entire property.

It is very important to carefully examine the conditions of both credit and mortgage contracts, notes the Citus lawyer: who will be the parties to the mortgage contract, whether the mortgage object, loan amount, repayment terms, additional mandatory payments and other conditions are stated correctly as agreed.

No less attention should be paid to the conditions of the mortgage itself: what actions the owner can take with the mortgaged property, how and when the mortgage can be deregistered, and what will happen if the worst scenario occurs: in which cases and in what order the creditor can start recovery. The circumstances and grounds for recovery of the expected credit amount are usually defined in both the credit and mortgage agreement, so it is necessary to analyze it as well.

What to do and what to avoid when faced with difficulties

“It seems a simple and obvious fact: if we want to make an expensive purchase and we have to borrow money for it, we are obliged to return that money and comply with the other terms of the contract. When there is a need or a great desire, we firmly make those commitments and everything seems clear. However, sometimes when circumstances change, the situation becomes unfavorable and we face challenges to comply with the contract, things start to look different.

It may seem that the circumstances are exceptional, very important and justified, but contracts and law have no place for emotions, there are agreements, rights and obligations. Therefore, it is better not to get lost in those emotions, not to create unnecessary stress, but to solve the situation before it becomes a problem”, advises the legal specialist.

She emphasizes that the buyer of the property, even in the case of a mortgage or other pledge of the property, is its owner and, as mentioned, not only rights, but also duties are related to it. For example: taking care of the property, paying taxes, cleaning, repairing the apartment or accumulating funds in the apartment building fund with the neighbors, if the apartment is in an apartment building.

The lawyer notes that there are cases when people who bought a house with credit and secured it with a mortgage believe that the owner of the house becomes the creditor, who is responsible for essential decisions related to the property, and the borrower will be able to avoid some obligations.

“However, this is not the case: the owner of the property, not the creditor, is responsible for all the aforementioned and other related duties, and there is no point in trying to hide from them. As with credit or mortgage agreements: ignoring notices, changing address or going abroad will not solve the problem, it will only deepen it – forcing the creditor to take extreme collection measures.

I have repeatedly heard from colleagues who work in the fields of credit, debt management, and transactions that people in such situations act recklessly. It is very important to act wisely and solve the situation as soon as possible, because there are certainly solutions, and delay or reckless actions can turn into a serious problem”, warns the expert.

When faced with difficulties in fulfilling the obligations of the credit agreement – paying the loan installments on time – different solutions are possible. It would be worthwhile to start with an attempt to agree with the creditor on the temporary postponement of the payment of installments, the extension of the loan repayment term – in this way, the monthly installments would be reduced.

Other solutions are more difficult to implement, but are also possible: you can sell the mortgaged property and cover the loan, sell it together with the liabilities, rent it out and use the payments received on the basis of the lease agreement to cover the loan payments, refinance the existing loan, pledge additional property owned by ownership or enter into a lease agreement. mortgage, if the value of the property corresponds to the size of the liabilities, or to look for other solutions according to the individual situation.

All these decisions regarding further actions are taken by the owner of the pledged property on his own initiative, but he must coordinate them with the creditor and obtain his consent.

“We live in a time of haste, when we often do not have enough time and opportunities to save the entire amount needed for a large purchase. However, these are also times of great opportunities, when we can really borrow and make our dreams come true. Let’s do that, but let’s get to know each other carefully and know our obligations, adhere to them and deal with changing situations responsibly”, wishes Citus lawyer Ieva Pukelienė.