Mortgages occupy an important place in modern financial and legal systems. This system, which provides assurance to the creditor in case the debtor cannot pay his debt, is widely used, especially in large-value loans. Mortgage can be defined as a right established on immovable property and securing the creditor's receivables. In this article, issues such as the concept of mortgage, its types, granting process, legal aspects, advantages and disadvantages will be discussed in detail.
1. Mortgage Concept and Definition
Mortgage is a limited right in rem that allows the creditor to sell the immovable property on which the mortgage has been established and meet his receivables from the sale price in case the debtor does not fulfill his debt. The mortgage gives the creditor the authority to sell the mortgaged property in case the debt is not paid, and this authority is exercised through enforcement bodies. The right of mortgage does not limit the debtor's authority to dispose of the immovable property, but it gives the creditor the right to collect the receivable from the sale price of the immovable property in case the debt is not paid. In accordance with the lex commissoria prohibition, an agreement cannot be made between the creditor and the owner of the immovable property stating that the ownership of the immovable property will pass to the creditor if the debt is not paid. The right of mortgage is dependent on the right of receivable, when the right of receivable is transferred, the right of mortgage is also transferred, and when the right of receivable is terminated, the right of mortgage is also terminated. The statute of limitations does not apply to a receivable secured by a mortgage.
2. Mortgage Types
Mortgage types vary depending on the purpose of use of the mortgage and the type of facility. Mortgage types differ in terms of the scope of security provided by the mortgage and the rights of the creditor.
2.1. Pledge Mortgage
Pledge mortgage is a type of mortgage in which the real estate is provided as collateral against the debt. In this type of mortgage, the value of the real estate secures the repayment of the debt. If the debtor cannot pay the debt, the creditor collects the receivable by selling the real estate. Collateral mortgages are commonly used in personal loans such as home loans. The creditor ensures the payment of the debt by covering his receivables from the sale price of the real estate. In this type of mortgage, the value of the real estate and market conditions are important because the sale of the real estate must be sufficient to cover the creditor's receivables in case the debtor does not pay his debt.
2.2. Mortgage
Mortgage is the addition of a new mortgage on top of an already existing mortgage on a property. These types of mortgages arise when the value of the real estate is high and an additional collateral is required on top of the existing mortgage. Mortgages are commonly used, especially for commercial loans or large projects. In such cases, the value of the real estate must be high enough to cover the receivables. In case there is more than one mortgage on a real estate, the order and priority of the mortgages are important for protecting the rights of creditors. Mortgages are collected in order of priority among creditors, and creditors respectively receive a share of the price to be obtained from the sale of the real estate in case the debt is not repaid.
3. Mortgage Granting Process
The mortgage granting process consists of certain stages to protect the rights of the debtor and the creditor. This process is completed by executing the mortgage contract and registering the mortgage right in the land registry.
3.1. Mortgage Agreement
The contract for the establishment of the mortgage right must be made formally. The official authority authorized to issue the contract is the land registry office. The mortgage contract made in the presence of a notary is not valid. The mortgage contract includes the identity information of the debtor and the creditor, the amount of the debt, the title deed information of the mortgaged property and other important details. After the contract, the mortgage right must be registered in the land registry. This registration in the land registry ensures the official recognition of the mortgage and the protection of the rights of the creditor.
3.2. Mortgage Establishment Document
Mortgage establishment document is an official document showing that the mortgage right is recorded in the land registry. This document shows that the mortgage transaction has been completed and the creditor's rights are secured. The mortgage establishment document is issued by the land registry office and delivered to the parties. This document is of great importance for the validity and enforceability of the mortgage. If the debtor does not pay his debt, the creditor can initiate enforcement proceedings based on this document and request the sale of the mortgaged real estate.
4. Mortgage Law and Legislation
Mortgage transactions are strictly controlled by various legal regulations and legislation. These regulations include provisions regarding the establishment, implementation and termination of the mortgage.
4.1. Mortgage in Turkish Code of Obligations
Turkish Code of Obligations includes basic legal regulations regarding mortgages. In the relevant articles of the law, the definition of mortgage, the rights and obligations of the parties, the establishment and termination of the mortgage are stated in detail. Turkish Code of Obligations determines the principle of mortgage dependency and the scope of the mortgage. These regulations ensure that mortgage transactions are carried out in a legally safe and fair manner. The Law of Obligations also regulates issues such as the transfer of mortgage receivables and the transfer of mortgage rights to the new creditor.
4.2. Mortgage in the Land Registry Law
The Land Registry Law regulates how mortgage rights are recorded in the land registry and the legal consequences of these registrations. In the relevant articles of the law, the formal conditions of the mortgage establishment, registration procedures and termination of the mortgage are explained in detail. The Land Registry Law also contains provisions on the transfer of mortgaged real estate and how to keep the records of these real estate in the land registry. These regulations ensure that mortgage transactions are recorded accurately and completely in the land registry and that the rights of creditors are protected.
5. Mortgage Advantages and Disadvantages
Mortgages offer a variety of advantages and disadvantages for both borrowers and creditors. Mortgage transactions enable borrowers to obtain large loans and creditors to secure their debts.
Mortgage Advantages:
- Low Interest Rates: Mortgage loans generally have low interest rates because the creditor can collect his receivables by selling the mortgaged property in case the debt is not repaid.
- Large Loans: Mortgages make it easier for borrowers to obtain large loans. Especially in housing and commercial loans, mortgages make it possible to obtain high loan amounts.
- Long-Term Borrowing: Mortgage loans generally offer long-term borrowing opportunities. This allows borrowers to repay their debts with lower monthly installments.
Mortgage Disadvantages:
- Property Loss Risk: There is a risk that the mortgaged property will be sold if the borrower cannot pay his debt. This may cause the debtor to lose his property rights.
- Enforcement Process and Costs: An enforcement process must be initiated for the sale of mortgaged real estate.
This process can be time consuming and costly. The creditor may also have to bear the costs of the enforcement process.
- Restriction of the Debtor's Saving Authority: The debtor's saving authority on the mortgaged real estate is limited. Transactions that will reduce the value of the real estate cannot be carried out and this restricts the property rights of the debtor.
6. Sale of Mortgaged Real Estate and Mortgage Removal Procedures
The sale of mortgaged real estate and the removal of mortgages are important legal processes for debtors and creditors.
6.1. Sale of Mortgaged Real Estate
If the debtor cannot pay the debt, the creditor may request the sale of the mortgaged property. This sale is carried out through enforcement offices and the resulting sales price is paid to the creditor. The sale of mortgaged real estate is usually done by auction and the buyer is found according to the market value of the real estate. The income obtained from the sale price first covers the creditor's receivables and the remaining amount, if any, is returned to the debtor. The sale of mortgaged real estate is an important process in terms of protecting the rights of the creditor and collecting the debt.
6.2. Mortgage Removal Procedures
When the debt is paid in full, the mortgage right ends and the mortgage is removed from the land registry. This transaction is carried out at the land registry office with the written consent of the creditor. For mortgage removal, documents showing that the debt has been paid in full and the creditor's request for mortgage removal are required. With the cancellation made in the land registry, the mortgage right ends and the restriction on the real estate is eliminated. This process is completed with the payment of the debt and the termination of the mortgage.
7. Mortgage Applications and Examples
Mortgages can be implemented in a variety of ways for different purposes. Residential mortgages and commercial mortgages are the most common application examples.
7.1. Residential Mortgages
Home mortgages occur when individuals use the house they purchase as collateral when taking out a mortgage loan. These types of mortgages are generally used for long-term, low-interest loans. When the debtor cannot pay the mortgage loan, the creditor collects the debt by selling the mortgaged house. Home mortgages are a method of lending frequently used by banks and financial institutions and play a large role in the housing market.
7.2. Commercial Mortgages
Commercial mortgages are mortgages established on commercial real estate. Businesses can mortgage workplaces or factories while taking out loans for their commercial activities. Commercial mortgages are often used for large projects and investments. In case the debt is not repaid, creditors collect their receivables by selling the commercial real estate. These types of mortgages are commonly used in commercial lending transactions and play an important role in financing commercial properties.
8. Mortgage and Loan Relationship
Mortgage is a type of collateral commonly used in loan transactions. Banks and financial institutions require mortgages to secure the repayment of the loans they provide. Mortgage loans generally have lower interest rates because the creditor can collect the debt by selling the mortgaged property if the debt is not repaid. Therefore, mortgage is an important tool that reduces credit risk. In loan transactions, mortgage provides the necessary security for the borrower to obtain a loan and protects the rights of the creditor. It is used in various areas such as mortgage loans, housing loans, commercial loans and investment loans.
9. Comparison of Mortgage and Other Types of Security
Mortgages offer different advantages and disadvantages compared to other types of security. In this section, a comparison of mortgage with other types of security such as letter of guarantee and pledge will be made.
9.1. Letter Of Guarantee
Letters of guarantee are guarantee documents that banks give to third parties on behalf of their customers. Unlike a mortgage, a letter of guarantee does not include a real estate lien and is generally used in commercial transactions. A letter of guarantee is a guarantee in which the bank undertakes to pay a certain amount. This type of assurance allows parties to trust each other in commercial transactions. The letter of guarantee guarantees payment to the creditor in case the debtor fails to fulfill its payment obligation, but it does not include a real estate lien and does not ensure that the creditor has rights over the immovable property.
9.2. Pledge
Pledge is the process of delivering movable or immovable property to the creditor or recording it in the registry as security for the debt. Mortgage is a special type of lien on immovable property. In pledge transactions, the debtor delivers his movable goods to the creditor and these goods secure the repayment of the debt. Mortgage is the process of providing collateral for immovable properties by registering them in the land registry. Pledge and mortgage provide security to the creditor in case the debtor does not pay his debt, but while mortgage creates limited real rights on immovable properties, pledge is mostly applied on movable properties.
Mortgage Frequently Asked Questions
1. How to Set Up a Mortgage?
Mortgage is established through an official transaction at the land registry office. After the debtor and creditor sign the mortgage contract, the mortgage is registered in the land registry. Mortgage agreements made in the presence of a notary are not valid, therefore registration in the land registry is mandatory. The person who establishes the mortgage right does not surrender his property, so the possession remains with the owner.
2. How to Remove Mortgage?
The mortgage ends if the debt is paid in full. The creditor, who documents that the debt has been paid, applies to the land registry office and requests the removal of the mortgage. With the cancellation process in the land registry, the mortgage is removed and the restrictions on the real estate are eliminated.
3. How to Sell Mortgaged Real Estate?
If the debtor cannot pay the debt, the creditor may request the sale of the mortgaged property. This process is carried out through enforcement offices and the resulting sales price is paid to the creditor. Mortgaged real estate is usually sold through auction and the income obtained primarily covers the creditor's receivables. If there is any remaining amount, it is returned to the debtor.
4. What Should Be Considered During the Sale of Mortgaged Real Estate?
When selling mortgaged real estate, it is important to sell the real estate at a price appropriate to its market value and to distribute the income obtained to cover the creditor's receivables. In addition, the sales process must be carried out by the enforcement bodies and all legal procedures must be fully implemented.
5. How Does the Mortgage Establishment Process Work?
The mortgage right is established by a formal contract and must be registered in the land registry. Mortgage on immovable properties subject to joint ownership can only be established as a whole and in the name of all owners. In shared ownership, each stakeholder can establish a mortgage on his or her own share; in this case, a mortgage cannot be established on the entire property.
6. What is Establishment of Mortgage Through Lawsuit?
If the person who undertakes the obligation to establish a mortgage right on the real estate does not fulfill this commitment, the creditor may file a registration lawsuit. If the court finds the plaintiff right, it decides to establish the mortgage and this decision is registered in the land registry.
7. What is Good Faith Protection in Mortgage?
Even if the mortgage is recorded in the land registry illegally, the right to mortgage can be acquired by well-intentioned third parties who trust the land registry. However, for this to happen, the receivable to which the mortgage is attached must be valid. If there is no valid receivable, the right to a corrupt mortgage cannot be acquired even in good faith.
8. What is the Principle of Mortgage Subordination?
The mortgage is tied to the receivable and this commitment is valid from the establishment stage. In order for the mortgage right to be established, there must be a valid receivable. When the receivable is transferred, the mortgage right is also transferred, and when the receivable is terminated, the mortgage right also ends.
9. What is the Certainty Principle in Mortgage?
The principle of certainty is important in terms of the amount of the receivable secured by the mortgage and the subject of the mortgage. A mortgage can only be established in case of the existence of a specific receivable and the amount of the mortgage must be stated in Turkish currency. The real estate on which the mortgage will be established must also be specific.
10. What is Fixed Ranks System?
A mortgage can be established for more than one receivable on a real estate. The fixed ranks system prevents one mortgage from being replaced by the next mortgage when it expires. The order of each mortgage is fixed and new mortgages can be established on vacant degrees.
11. What are the Mortgage Rights Arising from the Law?
Mortgage is generally a right established by mutual agreement of the parties. However, in some laws, there are also mortgage rights established directly by law without the need for agreement of the parties. Registration is not mandatory for these rights, but registration can be made upon request.
12. What is a Building Creditor Mortgage?
The construction creditor mortgage secures the receivables of subcontractors or craftsmen who provide materials or labor in construction or other works carried out on the real estate. This mortgage right can be asserted against the owner at the time of construction.
13. What are the measures taken to protect the value of mortgaged real estate?
Even though a mortgage has been established on the real estate, the ownership right still belongs to the owner. The owner can make various savings on the real estate. However, if these actions will reduce the value of the real estate, the creditor can request the judge to prohibit these actions and take the necessary measures.
14. Does the statute of limitations apply to receivables secured by mortgage?
The statute of limitations does not apply to a receivable secured by a mortgage. As long as the mortgage is registered in the land registry, the receivable does not expire and the creditor's rights are protected.
15. What is Mortgage Conversion?
If the debt is not paid even though it becomes due, the creditor has the right to obtain his receivable from the sales price of the mortgaged real estate. According to the Enforcement and Bankruptcy Law, even if the debtor of a receivable secured by a pledge is a person subject to bankruptcy, the creditor can only pursue the pledge by converting it into cash.
16. What is the Lex Commissoria Prohibition?
The Civil Code considers contracts stating that the ownership of the mortgaged real estate will pass to the creditor if the receivable is not paid, as invalid. The creditor can collect his receivable from the sales price of the mortgaged property, but not from the property itself.
17. How Does a Mortgage End Happen?
In accordance with the principle of subordination of the mortgage to the receivable, the mortgage ends when the receivable ends. If the mortgage expires, it must be canceled from the land registry. The owner may request the cancellation of the mortgage from the mortgage right holder and, if necessary, file a lawsuit to force cancellation.
18. Is the Consent of the Spouse Necessary for Establishing a Mortgage on the Family Residence?
TMK m. According to Article 194, one of the spouses cannot limit the rights on the family home without the express consent of the other spouse. Mortgage established on the family residence without the consent of the spouse is not valid. This provision is valid even if the family residence annotation is included in the title deed record of the real estate.