Definition: A charge, in real estate and mortgage terms, is a legal claim or encumbrance on a property that serves as security for a loan. When a lender registers a charge against a property, it establishes a right to take ownership if the borrower defaults on their mortgage obligations.

Types of charges

• First charge (first mortgage): This is the primary mortgage on a property. In the event of default, the first charge takes precedence over other liens or secondary charges.
• Second charge (second mortgage): Often used as a secondary loan, this charge ranks behind the first mortgage and only gets repaid after the first charge if the property is sold.

Implications for homeowners

The registered charge provides the lender with legal rights, including foreclosure if the borrower defaults. Removing or discharging a charge generally requires paying off the associated loan in full. Charges are crucial to understanding the terms and implications of mortgage financing, as they impact refinancing options and the lender’s recourse.

Last modified: November 5, 2024