How is a mortgage created?
How is a mortgage created?

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • How is a mortgage created?
  • Legal and equitable mortgages
  • Land
  • Shares
  • Ships
  • Aircraft
  • Intellectual property rights
  • Contractual rights, rights under insurance policies and debts

A mortgage is one of the four types of security recognised under English law and described in Types of security.

This Practice Note explains how a mortgage is created in respect of certain assets which are commonly the subject of security in commercial lending transactions.

The appropriate form for a mortgage depends on the type of asset involved and whether it is intended that the mortgage be legal or equitable. This Practice Note explains how a mortgage is created in respect of:

  1. land

  2. shares

  3. ships

  4. aircraft

  5. intellectual property rights, and

  6. contractual rights, rights under insurance policies and debts

For information on what a mortgage is and the type of assets that can be mortgaged, see Mortgages.

Legal and equitable mortgages

Mortgages are legal if they:

  1. transfer the legal title to the asset from the mortgagor to the mortgagee in conformity with relevant legal requirements; note that in the case of land, statute has intervened and a legal mortgage over land is actually a 'charge by way of legal mortgage' — title is not transferred but a legal interest is created

  2. are given over assets which are recognized at common law as being property and therefore capable of being transferred—this includes land and goods but not future assets or most types of intangibles, and

  3. are made by way of security for monetary obligations

Mortgages are