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QLD How Can Spouse Register for 2nd Mortgage?

Discussion in 'Property Law Forum' started by Rikesh, 22 September 2016.

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  1. Rikesh

    Rikesh Member

    22 September 2016
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    I wanted to know how a can spouse register a 2nd mortgage over the family home if the other partner has borrowed money from spouse.

    This is because the house is only on the partner's name and the spouse is registered on the mortgage by the bank, but not on the house title.
  2. GC.

    GC. Active Member

    26 October 2015
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    I'm not quite following the situation. Are "the spouse", "the partner" and "the other partner" all the same person?

    Regarding loans and mortgages:

    - When you borrow money from a bank, you take out a loan. If you provide security for the loan then the banks usually offer better interest rates because they can repossess the security if you are unable to pay back the loan. The security is normally some sort of physical property (such as land or a car) but can also be shares in a company (in the case of a margin loan).

    - If you use real estate (land / your house) as the security, then the bank will want to register its interest in the property. This is done by you granting the bank a mortgage over the title to your property and effectively gives the bank control over the property (you can't sell/transfer the title to anyone else without the bank's permission).

    This is the mortgage. Many people don't quite understand the difference between the loan and the mortgage and will often refer to the bank loan as "the mortgage".

    You can mix things up a bit. For example I have a single bank loan with three mortgages registered for it (three properties used as security). You can also have multiple mortgages over a property if you have multiple loans using it as security.

    I am not a lawyer, but my understanding is as follows...

    - To grant a mortgage to a bank, all owners on the title would have to agree and sign the mortgage document. (this may be different for "tenants in common", but most family homes would be "joint tenants" if there were multiple owners).

    - The bank wants some sort of security, but it doesn't necessarily have to be owned by the same person that is taking out the loan. This is when you have what's known as a "guarantor". The guarantor will mortgage their property as security for someone else's loan (the most common situation would be a parent going guarantor for a child who is getting a loan). The guarantor must agree to and sign the mortgage, not the person taking out the loan.

    - If there are multiple mortgages over a property, then I believe that the first mortgage always has precedence. This means that if you fail to make your loan repayments then the bank with the first mortgage can repossess the house and sell it, any money left over goes to the bank with the second mortgage, and any money left after that (if any) is returned to you. Banks usually have higher interest rates for loans secured with second mortgages because they are considered higher risk.

    So, to answer (what I think is) your question...

    - The names on the existing bank loan make no difference as to who can register additional mortgages.

    - If "the spouse" that wants to register the second mortgage is the same person as "the partner" who's name is on the title, then yes, they can take out further loans using a mortgage on the home as security.

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