This everyday word “mortgage” has strange origins.
“Mort-gage “comes from the 14th Century French word, which describes: “a Death Pledge or Dead Pledge”.
“Mort” means Dead and “Gage” means Pledge.
Despite the spooky meaning; it does not mean that the borrower is about to die when he signs a mortgage bond document!
DEATH OF THE LENDING AGREEMENT
The original meaning actually referred to the death of the loan agreement; either when the debt is fully repaid or when the loan is not repaid by due date. We are all familiar with the process of cancelling a mortgage bond in the Deeds Office when the loan has been fully repaid.
PLEDGE
The other component of the word is pledge and what does this mean? Also, from the 14thcentury: -pledge means: “to promise to hand something to the lender and to give it over as security
for re-payment.”
The everyday example would be, if you filled your car with a full tank of petrol and then you realised that you didn’t have any money to pay for it; the Garage Manager would normally take your cell phone or watch, (as a pledge), to hold as security; whilst you travel home to fetch your money. Upon your return and payment, he would then return the cell phone or watch to you.
IMMOVABLE PROPERTY IS PLEDGED AND COMBINED WITH AN AGREEMENT TO REPAY THE LOAN
The modern-day Mortgage Bond is a combination of a pledge together with an acknowledgement to repay the loan to the bank.
Essentially the owner of immovable property can use his land to pledge and secure his promise to repay the loan.
So therefore the legal mortgage bond document consists of two recognised legal rights; firstly an Acknowledgement of Debt, signed by the borrower, (an acknowledgement of indebtedness to repay the bank); coupled with a pledge which gives the bank full legal power to use the pledged immovable property, as a means to recover the loan should the borrower fail to repay the loan timeously.
Once the borrower has fully repaid the loan, the original mortgage loan agreement dies a natural death; hence the term “Death Pledge.”
Despite this, modern finance has, in some instances, refined the mortgage agreement to continue, after the first loan has been repaid, by allowing a re-advance of a further loan; but still under the security of the original property and agreement.
So, if the borrower cannot repay the loan, the bank will issue summons against the borrower and will then apply to Court to have the property, which was originally pledged, sold at an auction; in the expectation that somebody will pay enough money at the auction which the bank will use t to repay the loan that the borrower could not initially manage.
Of course, the borrower will lose the property, as the property is taken as compensation for the loan that was never repaid. So, the “property will be sold in execution of a court order that the property be sold in order to raise funds to repay the original bank loan.”
Once the property has been sold at an auction, the original mortgage loan agreement also becomes extinguished or “has died”, as the auction price repaid the loan and the original borrower no longer has the property to pledge to the bank.
In the words of the old French language: “the land is taken from him for ever and so becomes dead to him upon the condition being fulfilled.”
Denoon Sampson is the Director at Denoon Sampson Ndlovu Inc, currently ranked the ‘number 1’ top performing conveyancer by First National Bank Limited. He has 30 years of experience as a conveyancer, specialising in the full spectrum of property-related law and is often called upon to give talks or contribute content on related matters.