When arranging a mortgage, at which point does the legal charge take effect?

When arranging a mortgage, at which point does the legal charge take effect?

• A. Before exchange of contracts.
• B. On exchange of contracts.
• C. On completion.
• D. After completion.

Answer: (C)

The lender’s security over the property—the legal charge—only comes into effect when completion occurs. Until completion, there isn’t a binding security registered against the title, even though a mortgage offer and contract may be in place. On completion, funds are advanced and the charge is created and usually registered at the Land Registry, giving the lender a legal interest in the property. This enables enforcement if the borrower defaults. So, the correct moment is completion.

The lender’s security over the property—the legal charge—only comes into effect when completion occurs. Until completion, there isn’t a binding security registered against the title, even though a mortgage offer and contract may be in place. On completion, funds are advanced and the charge is created and usually registered at the Land Registry, giving the lender a legal interest in the property. This enables enforcement if the borrower defaults. So, the correct moment is completion.