BOND AND MORTGAGE Meaning and
Definition
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Bond and mortgage refers to a legal agreement that involves two parties, typically a borrower and a lender, in a real estate transaction. It is a financial instrument commonly used in the context of securing a loan or financing the purchase of property.
A bond is a legal document that serves as a written promise by the borrower to pay back a specific amount of money, known as the principal amount, to the lender within a certain time frame. The bond may also stipulate the interest rate at which the borrower is obligated to repay the loan. It represents a debt instrument issued by the borrower and is often secured by a mortgage.
A mortgage, on the other hand, is a legal instrument that provides the lender with a security interest in the property being financed. It is a type of loan agreement in which the borrower pledges their property as collateral for the loan. If the borrower fails to repay the loan as agreed, the lender has the right to foreclose on the property and sell it to recover the outstanding debt.
The bond and mortgage together form the basis for the lender's security interest in the property. While the bond outlines the details of the loan, including the repayment terms and interest rates, the mortgage serves as a lien on the property, ensuring that the lender has a legal claim to it in case of default. This arrangement provides protection to the lender, as it enables them to recoup their investment in case the borrower defaults on the loan.
