Skip to main content | Accessibility | Site Map | Contact Us

Mortgage Glossary Page Masthead Shire Direct - the home of tailor made financial solutions | freephone 08000 282 281

Equitable Mortgages and Equitable Charges: The Strength of Property Security

Below we explain the Equitable Mortgage, an Equitable Charge and Charging Orders, and look at how Shire Direct can help if you are threatened with repossession.

It can be a complex subject matter, but we'll try our best not to over-complicate matters. Remember our mortgage advisors are just a free phone call away should you wish to investigate the options and solutions that may be open to you.

Introduction: The Strength of Property Security

Mortgages are used to provide security for those having some form of interest in the property.

There are various ways in which security may be created by charges over the property which we'll take a look at below, the most secure of all is the Legal Charge (or Legal Mortgage), so let's begin with that.

Legal Charge (Legal Mortgage)

A Legal Mortgage is the main mortgage on the property, and is secured by a Legal Charge. Subsequent mortgages can be created, although the first mortgage will always take priority. In the event a debtor defaults on his mortgage payments, the ultimate remedy for the Mortgagee, is the repossession and sale of the property.

For a more detailed look at the Legal Charge / Legal Mortgage we recommend you take a look at our Legal Charge page.

Equitable Mortgage explained

An Equitable Mortgage arises where:

  • There is an agreement to charge the property, but there exists some form of defect that prevents the creation of a Legal Mortgage; or

  • The borrower does not have the appropriate capacity to enable the creation of a Legal Mortgage, for instance, where the person offering the security owns the property jointly, and the co-owners will not agree to a legal mortgage. In these circumstances, the security will be by way of an Equitable Mortgage relating to the equitable interest that the borrower has in the property. Thus, for example "A" and "B" own equal shares in a property that has £100,000 of uncharged equity. If "A" wishes to offer security, but "B" does not, then "A" can merely offer 50% equitable interest secured by an Equitable Mortgage, as opposed to a Legal Mortgage.

    Thus an Equitable Charge given by a debtor is only over their "equitable right" in the property as opposed to being a right in the property itself. Only a Legal Charge forms a vested interest in the property.

Equitable Charge explained

An Equitable Charge arises where the charge is created over land and buildings, but differs from an Equitable Mortgage in that:

  • There is no agreement by the owners to create a Legal Charge (or Mortgage) over the property, and

  • The Chargee (the person seeking the Equitable Charge) does not acquire a proprietary interest in the charged property.

The remedy for the Chargee is that they can either:

  • Sue the borrower, or

  • Apply to the court for an Order to sell the property included in the charge. (The Chargee does not have foreclosure rights or any statutory powers of sale under the Law of Property Act 1925).

Charging Order explained

A Charging Order is a Court Order giving a judgment creditor security over the debtor's freehold (or leasehold) property, or some other specified assets.

The process is usually that a Charging Order Nisi will be made by the Court on application by the creditor. Further Court Hearings will make the Charging Order absolute unless there are any representations received from interested parties giving good reason why the Charging Order should not be made absolute.

A Charging Order is enforceable as if it was an Equitable Charge created by the debtor at the time of issuance of the Charging Order Nisi. However, it will usually be set aside if the Charging Order fails to be made absolute. Thus a Charging Order is not completed until it is made absolute, although when it is, the charge operates from the date of the Charging Order Nisi.

Our apologies...

The above explanations detail many of the types of security and charges that can be registered by your creditors.

It is understood that these may be a little complex to follow, and so if you have any difficulties involving other charges that may be registered over your property, we invite you to contact one of our professionally qualified mortgage advisors, who will be pleased to investigate the options and solutions that may be available to you.

I have a creditor who has registered a charge on my property in respect of a debt. Legal action has been commenced, and repossession is threatened. Could Shire Direct help me?

Usually yes, but repossession proceedings will require immediate attention, so you must act quickly! If you find yourself in this position, please contact one of our qualified mortgage advisors as a matter of urgency.

We'll give you our immediate attention, and we'll carefully assess your circumstances, and come up with a rapid in-principle decision for you.

You'll find our approach to be friendly, professional, and helpful and we pride ourselves in providing a thorough attentive and personal service. So please don't hesitate to contact us if you would like to discuss your requirements, naturally they will be in confidence and without obligation!

Our mortgage experts are available everyday (including weekends) on Freephone 08000 282 281 up to 10.00pm, and will be delighted to help in any way possible - whatever your circumstances! You can also enquire online at any time.

That concludes our look at what an Equitable Mortgage and what an Equitable Charge is - hopefully it's made at least some sense - but we do appreciate it can be difficult to follow so please don't forget we're only ever a free telephone call away should you wish to talk to one of our professionally qualified mortgage advisors!

Enquire Online now, or call us today 08000 282 281 - our freephone lines are open 8am-10pm everyday! We'd love to hear from you!

The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.

There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.

THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

Adding existing debt to your mortgage will increase the repayment term and overall cost.

Shire Direct and Shire Direct Mortgages are trading styles of Shire Processing Centre Limited which is
Authorised and regulated by the Financial Services Authority in respect of regulated mortgage products and general insurances.
Registered No: 302389. Commercial funding and Secured Loans are not regulated by the FSA.
Licensed Credit Brokers. Consumer Credit Licence Number: 349999.

Shire Processing Centre Limited is registered under the provisions of the Data Protection Act by the Information Commissioners Office: Registration No: Z6795249. Registered in England & Wales. Company number: 2732202. Telephone calls may be recorded for training, monitoring and security purposes. All applicants must be aged 18-years or over.