A legal mortgage is one that fulfills all legal requirements for a mortgage, while an equitable mortgage does not fulfill these requirements but still operates as a mortgage. Those with specific mortgage questions should consult an attorney.
A legal mortgage occurs when the owner gives legal title of property to a creditor to secure payment of the owner's debt. In a typical mortgage, once the debtor pays off the debt, legal title to the property will revert to the original owner.
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Courts of equity evolved to redress injustices caused by legal courts' strict adherence to the law. Courts of equity thus recognize "equitable" mortgages, which occur when a transaction does not fulfill all legal requirements of a mortgage, but still looks and operates like a mortgage; in other words, property is offered to a creditor to secure debt.
Equitable mortgages generally operate like legal mortgages, but in case of default, the legal mortgage debt on a property receives satisfaction before that of any equitable mortgage. The equitable mortgage holder's rights to the property also dissolve if a third party that does not know of the equitable mortgage buys the property.
- TheFreeDictionary.com: Equitable Mortgage
- "Black's Law Dictionary (Seventh Edition)"; Bryan Garner; 1999
- U.S. Legal: Equitable Mortgage Law and Legal Definition
Erika Johansen is a lifelong writer with a Master of Fine Arts from the Iowa Writers' Workshop and editorial experience in scholastic publication. She has written articles for various websites.