Mortgage contracts in the Philippines
An understanding of mortgage law is important before entering into any contract.
One of the problems with the law is that people don’t understand it.
Even lawyers, who have actually studied and practiced it for years, argue with each other about what the law means.
So it isn’t surprising that many people enter into a contract like a mortgage agreement without understanding that the provisions of that contract have limits fixed by law.
A mortgage is one of the kinds of contracts specially regulated by Philippine law. Because it is regulated, the signatories to a mortgage cannot just decide among themselves what their rights and obligations are in their mortgage contract. The terms of a mortgage contract should not violate the regulations set by the Civil Code of the Philippines or else those terms will be invalid.
It’s the sort of thing that gives rise to nasty and protracted litigation. This is one of the reasons why people entering into loan agreements, whether as debtor or creditor, should have a basic understanding of the law on mortgage contracts.
You’ll have problems if your mortgage contract is not valid.
What follows is not meant to be an exhaustive discussion of all aspects of the mortgage law, but a brief primer to enable anyone to understand its basic aspects. A simple mortgage contract is also included, and the comments are open for any questions.
Contents
- Who are the parties to a mortgage agreement?
- What is a mortgage?
- What does a mortgage do to the property?
- What are the requirements for a mortgage?
- What is the form of a mortgage contract?
- What does a mortgage contract look like?
- Is there such a thing as an unwritten mortgage?
- What happens in case the debtor fails to pay the principal debt secured by the mortgage?
Who are the parties to a mortgage agreement?
A mortgagor is the one whose property is offered as security. He must be the absolute owner of the property mortgaged. A mortgagee is the one who accepts the security of the property. The mortgagor is typically the debtor and the mortgagee is typically the creditor.
Who are the parties to a mortgage?
However, third persons who are not parties to the principal obligation may secure it by mortgaging their own property.
What is a mortgage?
A mortgage is a contract through which a debtor gives security for the fulfillment of a principal obligation to a creditor. This is done by designating an immovable property (like a house and lot) or real rights over immovable property as answerable for the principal obligation. In case that obligation is not fulfilled in the time agreed on, the designated property or rights will be publicly auctioned and the obligation shall be satisfied with the proceeds of the sale.
What is a mortgage contract?
The essence of a contract of mortgage indebtedness is that a property has been identified or set apart from the mass of the property of the debtor-mortgagor as security for the payment of money or the fulfillment of an obligation to answer the amount of indebtedness, in case of default of payment.[1]
A valid mortgage should be annotated on the Title to the property at the Register of Deeds in order to be valid against third persons (those not party to the contract), and so create a real right enforceable against the whole world.
Annotate the Title at the Registrar of Deeds.
The mortgage follows the property regardless of change of ownership or possession. This means that, even if the mortgaged property passes into the ownership or possession of someone other than the mortgagor, the mortgagee still has a right to satisfaction from the property if it is foreclosed.
What does a mortgage do to the property?
The real nature of a mortgage is described in Article 2126 of the Civil Code:
Art. 2126. The mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted.
Mortgage is attached to the property.
A mortgage creates a real right which follows the property even if the property is transferred by the mortgagor to someone else. The sale or transfer of the mortgaged property cannot affect or release the mortgage. A transferee is necessarily bound to acknowledge and respect the mortgage. In fact, the mortgage on the property may still be foreclosed despite the transfer:
Art. 2129. The creditor may claim from a third person in possession of the mortgaged property, the payment of the part of the credit secured by the property which said third person possesses, in terms and with the formalities which the law establishes.
Mortgage is the responsibility of any new owner.
What is more, a mortgage has a full scope. A mortgage covers not just the property by itself, but also extends to the natural accessions, to the improvements, growing fruits, and the rents or income not yet received when the obligation becomes due. It also covers to the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use, with the declarations, amplifications and limitations established by law, whether the estate remains in the possession of the mortgagor, or it passes into the hands of a third person.[2]
What are the requirements for a mortgage?
(1) A mortgage is an accessory contract to a principal obligation. In order to exist, a mortgage must be constituted to secure the fulfillment of that principal obligation;
(2) The mortgagor must be the absolute owner of the thing pledged or mortgaged;
(3) The persons constituting the mortgage must have the free disposal of his property, or be legally authorized for the purpose.
A few simple requirements for mortgage.
Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.[3]
What is the form of a mortgage contract?
It is a written contract. It is indispensable that the document in which the mortgage appears to be recorded in the Registry of Property (this makes it enforceable against the whole world). If it is not recorded, the mortgage is nevertheless binding between the parties.
A mortgage is a written document.
The contract should be notarized in order to be a public document. When having it notarized, the parties should each appear in person before a notary public and present valid identification bearing their photograph and signature. (A community tax certificate (CTC) or sedula is by itself not considered competent identification.) If these rules on identification and notarization are not followed, the authenticity of the mortgage contract might be denied by one of the parties.
What does a mortgage contract look like?
This is an example of a very simple, but valid mortgage contract. It is important to note that mortgage contracts can be written simply or in greater detail to reflect the particular agreement of the parties and the specific protections that they want to add or include.
A pen at the signature line of a contract.
It is also important to remember that a mortgage agreement should be annotated on the Title to the property at the Register of Deeds in order for it to be effective against persons who are not a party to the contract.
Download Sample Mortgage Agreement
Is there such a thing as an unwritten mortgage?
There are specific situations where the law deems a mortgage to have been constituted even absent the formal requirements. In such a case, there is deemed to be an “equitable mortgage”.
Sometimes, an unwritten mortgage will occur.
An equitable mortgage has been defined as one which although lacking in some formality, or form or words, or other requisites demanded by the law, nevertheless reveals the intention of the parties to charge real property as security for a debt, there being no impossibility nor anything contrary to law in this intent.[4]
A situation is deemed an equitable mortgage where:
- the parties entered into a contract denominated as a contract of sale; and,
- their intention was to secure an existing debt by way of a mortgage.
Examples of unwritten mortgages are below.
Article 1602 of the Civil Code provides examples of such situations:
The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefits to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.
Anyone of the above makes the transaction an unwritten mortgage.
Anyone of the circumstances laid out in Article 1602 is sufficient to support the conclusion that a contract of sale is, in fact, an equitable mortgage. This approach follows the rule that when doubt exists on the nature of the transaction, the law favors the least transmission of property rights.[5]
What happens in case the debtor fails to pay the principal debt secured by the mortgage?
There is a misconception that, if the mortgagor is unable to pay, the property immediately passes into the ownership of the creditor. This is not so.
A demand should be made on the mortgagor to pay the debt due. If he fails, then the property can be foreclosed.
When the mortgagor cannot pay, a house can be foreclosed.
There are two modes of foreclosure, judicial and extra-judicial (although in fact they both make use of the Court’s offices), each with their own particular procedures.
The effect of foreclosure is not that the mortgagee becomes the owner of the property, but that the property is put up for public auction. It is through bidding at the public auction that the mortgagee can eventually become the owner of the property.
References
[1] Ocampo vs. Land Bank of the Philippines, G.R. No. 164968, July 3, 2009
[2] Article 2127, Civil Code
[3] Article 2085, Civil Code
[4] Rockville Excel International Exim Corp. vs. Spouses Culla, G.R. No. 155716, October 2, 2009
[5] Rockville Excel International Exim Corp. vs. Spouses Culla, G.R. No. 155716, October 2, 2009
Hello po, what if the land is still on the mother title and only a part of it will be subject to mortgage by one of the heirs? Is it safe to get a mortgage contract with a mother title? And what are the necessary things to do for the contact to be valid?
This cannot be done unless the property has been subdivided amongst the heirs or unless co-heirs consent. If only one heir signs a mortgage contract, the lender’s security is weak. The mortgage may be challenged later. Also, this can lead dispute among heirs and even invalidate the mortgage. If, however, all of the heirs agree, then all the heirs must sign the mortgage contract. Better wise seek with a lawyer to assist you. You can reach out with us through email inquiries.fcb@gmail.com or admin@lawyerphilippines.org
Hi Atty, my father is currently tenant to agricultural land(coconut farm) for about 20years. There is no written agreement on my father possession stating that he is a legal tenant, rather an oral agreement. The owner & his husband was dead, the legal heir also dead which was found to be the only son with 1 child(now on legal age). We dont have any contact on them. Here is my case
1. There is a person (an old customer on coconut crops) claiming that the owner had mortgage all the 3 hectares coconut fruits to him by the owner. How can we verify?
2. What is the right of my father with regards to harvest of coconut on the said farm?
3. Is is legal for the claimer to get all the coconut harvest without giving my father any share?
Hello. This is very complicated situation you and your father. A person claiming that the landowner mortgaged the coconut harvest must show proof. Oral claims alone are not legally binding unless corroborated by witnesses or records. You can verify by checking the Registry of Deeds if the mortgage is recorded. As for the tenancy of your father, under the law, it can be established even by oral agreement provided there is proof of continuous possession and sharing harvests. As for the legality of the claimant taking all harvest. No, it is not legal for the claimant to take all the coconuts without giving your father his rightful share.
It is wise to bring this situation to a lawyer that will give you legal advice.
In 2019, a parcel of land was sold in an auction sale to execute the CIAC judgment award in favor of the creditor against the debtor. The property had been previously mortgaged by the debtor to a certain Philippine Savings Bank to secure a loan.
The creditor acquired the property as a result of the auction sale. A year elapsed after the auction sale without the debtor having redeemed the property. Thus, the sheriff executed a Certificate of Sale in favor of the creditor, and the said Certificate of Sale was annotated on Land Registry title
In April of this year 2025, the Sheriff served official notice upon the Savings Bank regarding the sale at public auction of the said property and the lapse of one year thereafter without the debtor having redeemed the property. The said notice informed the Savings Bank that the latter’s rights as a mortgagee are subject to the rights of the creditor under the law such as, but limited to, the right to be notified in case of the foreclosure of the mortgage in favor of the Savings Bank over the property, the right to redeem the property should the property be foreclosed, and the right to own and possess of the property upon the release of the mortgage. The notice also directed the Savings Bank to give the creditor, within five days, an update on the status of debtor’s loan obligation. In compliance with the directive, the Savings Bank gave the creditor an update on the status of the debtor’s payments.
The creditor decided that she would like to pay off the remaining loan obligation of debtor so that the title to the property could be consolidated in the creditor’s name as the winning bidder. For this purpose, in May 2025, she sent an e-mail to the Loans Accounting Department of the Savings Bank requesting for a statement of account. The creditor however has not yet received any statement of account from the Savings Bank to this day.
When my lawyer followed up the matter with the Loans Accounting Department, my lawyer was told that they are waiting for the advice of the legal department on the matter before sending the statement of account to the creditor.
My lawyer sent an email to the Bank’s legal department to follow up the matter and to ask the Bank’s the advice to the Loans Accounting Department regarding the request of the creditor for a statement of account. What do you think is causing this delay? Will the bank decide in our favor? Please help….
Which agreement is appropriate to this scenario? A Conditional Sale or a Mortgage Agreement? If none of them, which one? What other documents must be attached to the agreement.
The parties are relatives:
1. Seller (Mortgagee) agrees to give Buyer (mortgagor) full possession of the property.
2. Buyer pays 1/3 of the agree purchase price as down payment.
3. Seller agrees for Buyer to pay the remaining balance of purchase price in installment basis – payable in 4 installments over a period of eight years.
A mortgage applies when the buyer already owns the property and uses it as a collateral for a loan. under the conditional sale, the seller gives the buyer possession of the property after a down payment., while ownership or title is transferred once the buyer completes all the installment payment. in your case, conditional sale agreement is more appropriate than mortgage.
if the property is co-owned by 3 persons. Can 2 of them mortgage the property to secure a bank loan without the consent of the other 1 owner?
No, two co-owners cannot validly mortgage the entire co-owned property without the consent of the third co-owner. The tow- co-owners may mortgage their combined share but the mortgage cannot bind the other one-co-owner share.
Atty,
My grandma has a property mortgaged to her neighbor year 2008, by year 2018 my family wanted to pay the total debt to take back the property, but the mortgagee refused. Unknowingly the property was already mortgaged by other person year 2017. Is it legal that a mortgagee mortgaged the property to someone else without our knowledge? Can we take back the property?
This is an urgent legal matter and consult with a property lawyer immediately.
Due to high interest rates, my husband and i considered to have our loan with a bank taken out. That is when we found out that said bank failed to annotate our title, now they want us to wait for the title to be annotated before they can allow the loan take out. Is this right?
You may coordinate with the bank and ask them to process the annotation immediately. It is important also to consider that each back has their own rules, and procedure in this kind of matter. You may also follow up with the Registry of Deeds if the annotation is pending or were incomplete. If the bank’s negligence causes financial loss, you may consult a lawyer about possible claims.
Hello Atty. BRITANICO,
Can a foreshore land be subject to a mortgage?
IF THE FORESHORE LAND IS COVERED BY A TAX DECLARATION CAN THIS BE LEGALLY FORECLOSED IF THERE IS A REM or is the mortgage Null and void from the beginning because it is not a valid mortgage?
thank you.
Marjoe Yu
Foreshore lands are part of the public domain and cannot be privately owned, mortgaged, or foreclosed. A tax declaration covering foreshore land is not proof of ownership, so any mortgage or Real Estate Mortgage over it is generally null and void from the beginning.
Hi Atty, there is a case that my mother applied for land ownership through the “Kaloob na Patente” program in the early 2000s which was successfully named under her. nevertheless, the original copy of the land title was never delivered to her because of unscrupulous people and it was in the possession of someone else for almost 2 decades. We only found out last week that the property was under mortgage which was done by two persons. At which the mortgagor is the one who informed us that the original copy was in the hand of the mortgagee. The mortgagor forcibly himself to look upon the rightful owner (My Mother) because of the unreasonable amount of money demanded by the mortgagee at which the balance of the mortgagor is only 5K during that time. Does my mother have the right to claim the original copy from the mortgagee since she is not totally involved and has no idea about this agreement? The mortgagor informed us that there was no written agreement between him and the mortgagee. Your unparalleled advice is highly appreciated. Thanks
Since the land belongs to your mother, the two individuals who transacted had absolutely no legal authority to mortgage it. A person cannot give away or encumber what they do not own (Nemo dat quod non habet). Because your mother was not involved and never gave a Special Power of Attorney (SPA), the mortgage is null and void from the very beginning. The mortgagee (the lender) might argue that they are holding the title as “collateral” or a guarantee for the money borrowed. However, because the underlying mortgage contract is void, the mortgagee’s possession of your mother’s title is illegal. Furthermore, since the mortgagor admitted there is no written agreement between them, the mortgagee cannot even prove a valid security agreement exists.
What will happen if the mortgage is only for 1 year but the mortgagee failed to foreclose the property even after 25 years?
The mortgagee completely loses the legal right to foreclose on the property or collect the debt. The property can no longer be seized, auctioned off, or foreclosed by the lender. The lender cannot even file a regular collection case in court to get the cash back, because actions based on written contracts also expire after 10 years.Even though the mortgage is legally unenforceable, the physical annotation or stamp on the back of the land title does not automatically disappear. It remains there as a “stale lien” or a cloud on the title, which will prevent the owner from selling the land cleanly to anyone else.
What happen if the purchased property is later found to be mortgaged(prenda). Who has the obligation to pay the motgaged amount, seller or buyer? We are in the middle of transferring the title. Capital gains tax have pain paid. Thanks.
Since you are in the middle of transferring the title and have already paid the taxes. Normally, the Registry of deeds will not issue a clean transfer unless the mortgage is cleared. The seller must pay off the mortgage to release the lien if the buyer failed to disclose to the buyer. Now, if the transfer of property is complete, the property can still be foreclosed if the mortgage is unpaid. It is important to ensure that the lien is cancelled before completing the transfer.
What happened when during the auction. Sold price is more than the total loan balance. What happen to the variance? Will it be given to the mortgagor or not anymore?
If the winning bid is higher than the total debt, the excess amount is return to the mortgagor.
Just to inquire.. I?m a 60 year old mortgagor of a property (House and Lot)extended by GSIS sometime 2004.. But in 2005 i together with my whole family migrated and started a living abroad.. When we left I entrusted the payment service of the property to my father -in-law.. Unfortunately he passed away in 2011. That is the time that my payment went south. Burden by earning a living abroad plus serious health issue that almost cost my life then have further aggravated my situation.
I knew my obligations to serve the mortgage.. and that moment i knew that sooner or later I expected that i will be serve with Notice of Non payment as a prelude to foreclosure.. But to my amazement it wasn?t serve for years only this February 23 2023, 11 years after i have been delinquent that i received a letter from GSIS received by our caretaker address at my ancestral house, which is not my nominated address, it should be on the address of my mortgage property as My brother in law and his were living on the property and in fact as soon as I know i am delinquent sometime in 2011 I keep asking them if there is a letter of a notice of non payment from GSIS.. Quite puzzled with the situation I tried to reach out to GSIS sometime 2018 by asking my brother in to enquire about it . I even executed a letter of authority to him but apparently GSIS usual response was it is under computation.. The same happened In 2019 when i went home i even went personally at GSIS but usual response is the same that it is under computation, they even gave me a appointment paper informing that they will email me. But the appointment did not happen. Right now i?m in real dilemma as my mortgage of 1.2 million ballooned to 6.1 million because of penalty and surchages that GSIS apparently.. Admittedly i failed in due dilligence but same to GSIS.. If they gave me notice of non payment was given to me as earlier as possible i supposed it will not come a this point perhaps have negotiated for a loan restructuring. GSIS said that there were repeated demands letter to me which i deny.. imagine 12 years have gone by it is only now that they were enforcing the foreclosure.. I am amenable to enter a loan restructuring .. but paying paying 6. 1 million outright i am not capable to. I am really concerned about my brother in law?s family living thereat as they got nowhere to go to in case the foreclosure happen. Do you reckon that i got legal ground to negotiate for an acceptable term with GSIS to avert foreclosure.
Thank You
Thank You
We believe it would be best to schedule a visit to our office so we can discuss this important matter in detail. Please note that this is highly sensitive and will be treated with the utmost confidentiality.
If a property is mortgaged as collateral for a loan from a bank and the title duly annotated by register of deeds, who keeps the the property title – property owner or the bank?
The owner keeps the original owner’s duplicate copy of the title, not the bank. The bank’s interest lies in the fact that the title is annotated with a mortgage, which serves as public notice of the bank’s lien. In other words, the bank has little concern over possession of the title itself; the annotation at the Registry of Deeds is sufficient to show that the land is mortgaged to them.
Hi. What will happen to rem if forclosed? Does the mortgagee becomes the owner?
The property is auctioned to pay for the obligation.
Can the mortgagee be a bidder in the said auction?
If the auction is a public sale.
What happens to an immovable property that was mortgaged since 1980s and the not married owner already passed away?
Will the principal amount increase? How to make settlement?
We do not know who mortgaged it as it’s not stated in the annotation of the tax declaration, only the date, principal amount the name of the bank, and the who signed but no details who mortgaged it. We do not have the notarized documents either.
To determine if the land title was mortgage it is annotated in the CTC not on the Tax declaration. Since the mortgagor is deceased, the obligation becomes part of the estate. Heirs inherit both the property and the debt attached to it. The principal itself does not automatically increase. What usually grows over time are interest, penalties, and surcharges if the loan was never settled. In this case, seeking a lawyer is the course of action. The lawyer will assess your situation and establish an appropriate legal measure.
If there are 4 owners to a property must all of them sign the mortgage to make it valid?
Under the co-ownership rule, each co-owner has rights over their undivided share. One co-owner cannot bind then entire property without the consent of others. In mortgage, if one owner only signs, the mortgage is valid only for their respective share, not the whole property.
Atty,
Can an ownership of leasehold rights be mortgaged?
Yes, leasehold rights can be mortgaged. This can be used as collateral loan, but this is subject tot the terms of the lease contract and the consent of the property owner.
Hi Atty! What are the step by step process of Registering a real property mortgage in the ROD? Thank you!
-Yaz
In practice, it is usually the bank or lending institution that processes the annotation, provided you have complied with the requirements for the mortgage agreement and registration. Typically, the bank or institution will ask you to submit a certified true copy of the land title, the tax declaration, the real property tax clearance, and other supporting documents. Additional requirements may also be necessary depending on the circumstances, such as spousal consent or special clearances from agencies like the Department of Agrarian Reform.
Hi if the property is mortgaged and the onwer dies, can we transfer the onwership of the property while mortgaged?
It can be transferred but the mortgage does not get extinguished by the death of the mortgagor. The lien stays attached to the property until the loan is fully paid. Normally in this kind of situation, heirs are encouraged to settle the depts or liens prior division of share amongst heirs.
Hi, im having problem with poultry farm and has rented out but new bank amortization schedule has a balloon payment of P 18 Million pesos to be paid in 2037 at once. im 65 years old and will not be able to raise up this amount as the rental is P 1.1 M per harvest with guaranteed 6 harvest per year. I have amortization payment semi annual P 952,230.37 and annual P 7,605,661.69 for the years 2023 Jan to July 2026.then will be P 6,648,052.84 from July 2023 thru July 2036 then one time balloon payment of P 18 M ++.
I would like to offer to the current renter Lease to own but I prefer the bank will negotiate and enter into contract instead and leave me out.Is this possible? Thank you for your advice.
Can we talk over this through email? Since this matter is sensitive and requires confidentiality, we kindly ask that you send your inquiry directly to us via email at admin@lawyerphilippines.org. Thank you
Hi Atty. please enlighten me if it falls under the mortage contract
My sister barrowed a money and used it to build a store, The creditor who is thesame person who lend the mony had a written contract with my sister stating that the creditor will use the store up to three years for business purposes and that after three years my sister will pay back the creditor.
The document by the way is not notarized, will it be under equitable mortgage? And the fact that the creditor being the occupant without rental fee to the store is it a disadvantage to my sister?
Looking forward for answers
Thank you.
Normally, a mortgage contract typically involves property being pledged as security for a loan, with an annotation on the title at the Registry of Deeds. In your case, no mortgage annotation and no express pledge of the property. However, certain contracts may be treated as an equitable mortgage if they show characteristics of a loan secured by property, even if not formally called a mortgage. One indicator is when the creditor is given possession of the property without rent, which can suggest that the property is being used as security for the loan. The fact that the creditor occupies the store without paying rent for three years is indeed a disadvantage to your sister, because she loses potential rental income. It is wise to consult with a lawyer to help your sister what she can do.
Atty,
My dad bought a house in 2014 and it was financed in house by the developer with whopping 18% interest rate. He was 76 years old at that time and was put on 15 years contract. My dad was a pensioner from the US. The contract is just under my dad’s name. My mom signed basically a spousal release consent or marital consent. My dad passed away last year and from the developer, the last payment made was 2018. Needless to say, the amount due now is more than the original purchased amount due to penalties and interests. The developer is still moving towards foreclosure. Is this legal to even sell it to a 76 years old with 18% interest rate? Do I have a case if I try to fight for the property? I don’t see any MRI (Mortgage Redemption Insurance) stated in the contract but then again I don’t have itemized what was paid with down payment and processing fees. Any insight is appreciated. Thank you.
Yes, it is legal. In the Philippines, there is no maximum age limit to buy real estate or enter into a contract, provided the person is of sound mind. While commercial banks and Pag-IBIG strictly enforce an age cap (usually requiring the loan to be fully paid by age 65 or 70), private developers doing in-house financing are not bound by bank rules. They routinely grant loans to elderly buyers because they know if the buyer passes away or defaults, the developer can simply attempt to seize the house back through foreclosure.
Regarding the 18% Interest Rate. Yes, but it can be legally challenged. Ever since the Usury Law was suspended in the Philippines, developers and lenders have been legally allowed to stipulate high interest rates. In-house financing rates in the country historically range from 12% to 18% per annum.
However, the Supreme Court has a powerful counter-rule: Even if a borrower signs a contract voluntarily, courts have the equitable power to strike down or reduce interest rates and penalties if they are found to be “iniquitous, unconscionable, and exorbitant” (contrary to morals and public policy). While 18% base interest alone is occasionally tolerated by courts for high-risk in-house financing, the compounding penalties the developer added on top after 2018 are highly vulnerable to being legally slashed by a judge.
What is the property mortgage was obtain fraudulently? What if the mortgagor did forgeries to transfer the title to his/her name 7 days prior to putting the property up for mortgage? Is this a legal mortgage? Can a mortgagor go after the real owners of the property for compensation/foreclosure?
A valid mortgage requires that the mortgagor is the true owner of the property. If someone forged documents to transfer the title to their name and then mortgaged it, the mortgage is not legally valid, because the mortgagor had no real ownership to pledge. In law, this is called a void mortgage, it has no effect because it was based on fraud. IF the mortgagor who committed forgery cannot demand compensation or foreclose against the real owner. in fact, the mortgagor may face criminal liability for such act.
Atty:
I have a small property in Laguna. If I will sell it directly to a buyer who is paying the selling price on installments like a mortgage, do I need both deed of conditional sale and mortgage contract? Thanks po.
Do not use both contract at the same time. They represent two completely opposite was of handling a real estate sale.
You can use a Contract to Sell. In this set up, you keep the lan title in your name while the buyer pays the installment. You only transfer the tile once every last peso is paid. If you use a Deed of Absolute Salw with Real Estate Mortgage Contract, you transfer full ownership to the buyer immediately, and then the buyer signs the property back to you as collateral.
I highly suggested you seek a lawyer that will help you clearly establish a right path that matched in your situation.
My mother made a loan towards a property in 1995. She passed away in 2015. The family just discovered that there is an annotation or an encumbrance at the back of the title. We did find the Cancellation of Mortgage certificate; however, the document was not notarized. Republic Planters Bank, the bank where she made the mortgage, is no longer in business. Its successor bank (Bank of the Philippine Island) does not keep documents over 7 years. What shall we do to have this annotation cleared?
Then another property has the same problem, and we were not successful locating the cancellation of mortgage. Republic Planters Bank, the bank where the loan was made, is closed for business. The successor bank does not keep records for over 7 years as well. We are hoping you can help. Thank you.
The Register of Deeds (RD) cannot accept an unnotarized Cancellation of Mortgage because it violates the Property Registration Decree (P.D. 1529), which requires all registrable land documents to be public, notarized instruments.
Since the original signatories from RPB are long gone and cannot appear before a notary public today, you must pursue an Administrative Remedy through the PDIC.
Hi Atty.,
I executed a Real Estate Mortgage Agreement. It is stated in the REM Agreement that a loan was obtained by the debtor/mortgagor and the property serves as a security for that loan. My question: is there a need for the execution of a separate Contract of Loan? or does the REM Agreement alone suffice?
There is a clear distention between REM and Contract of Laon. A Real Estate Mortgage is a security contract that secure the obligation by designating real property as collateral while contract to loan is the principal contract that establishes the debtor’s obligation to pay a sum of money to the creditor. In this concept, an REM is only an accessory to the principal obligation with is the contract to sale. Thus, the REM does not suffice to prove the existence of the loan. The loan must be evidenced by a separate Contract of Loan, or at least by a promissory note or other document showing the debtor’s obligation.
Hello Atty.
It is stated here that , For the mortgage to be valid, the mortgagor has to be the absolute owner , or was given a consent to mortgage the whole undivided property. If without consent, can the mortgage be rendered invalid? The mortgagor defaulted and the bank foreclosed the land with houses of the co-owners. The Title has the et. al. in the name of the Registered Owner. Thanks po.
Without the consent of the other co-owners, the mortgage is NOT entirely invalid, but it is “partially void.” The bank CANNOT foreclose the whole land or the houses of the non-consenting co-owners. The bank only acquires the defaulting mortgagor’s ideal share.
Atty, can a lessor and lessee enter into a mortgage contract while their contract of lease is subsisting?
Technically yes, but the scope and validity depend on what exactly is being mortgaged and whether the lease contract allows it. Under the civil code, there’s this called the leasehold rights, this can be assigned, transferred, or encumbered, unless expressly prohibited in the lease contract. The lessee can mortgage their leasehold rights, if they default, the mortgagee (bank) can foreclose and step into the lessee’s shoes for the remaining lease term. The lessor may also mortgage their ownership rights in the property. This is separate from the lessee’s mortgage of leasehold rights. If both lessor and lessee agree to mortgage their respective rights together, the mortgage covers both ownership and leasehold interests. If only one-party mortgages, the mortgage is limited to that party’s rights.
Atty
The land was mortgaged in the 90s there is no written agreement between the mortgagor and mortgagee
The heirs of mortgagee want to renovate the house built on the land. Can the law allows it to be done.
Generally, the mortgagee does not own the property. In this case, they are generally prohibited from making substantial alterations or permanent renovations to the house/land without the owner’s consent. But in some cases, the law may allow it because it is necessary. This is the difference between the necessary expense where for example, fixing leaking roof, this kind of repairs the law may allow. If renovation like, modernizing or changing layout of the house, this is called useful expenses.
My Brother is an OFW and married, He has a house mortgage at Pag-Ibig Fund, he has completed the equity to the developer and he is paying his monthly direct to Pag-Ibig Fund. He wants me to buy the property and I will continue the monthly amortization. Is that Legal and possible with out her wife consent since they are already on the rocks and have an on going annulment which my brother filed way back 2019.
Yes, it is legally possible for you to buy the property and take over the Pag-IBIG loan, but it is ABSOLUTELY ILLEGAL to do so without his wife’s written consent.
Because your brother is legally married, the property is considered part of their marriage’s community property. Attempting to sell this property to you without the wife’s signature will result in a completely void contract that can be canceled by a court later on.
Hello Atty,
We have a contract until December 9 but I will pay the money back by the end of march. Will the contract will null and void once they accept the payment or we should finish the contract?
No, the contract does not become “null and void.” Instead, it is legally “extinguished” and terminated early by mutual fulfillment.
Good Afternoon, Atty! If a land was mortgaged to us hence making us the mortgagee, can we use it as a parking space that is up for rental?? Or do we have to ask for the consent of the mortgagor before doing so? Thank you
No, you cannot use the land as a parking space or rent it out without the explicit written consent of the mortgagor.
Good day, I have concerns about my car loan, I presumed that the bill had already been paid only on the last bill. when I want to pay the bill it was surprised me that I had a balance of about 124,000. So I visit the branch where my account is attached and one of the agents told me then it should be in the main office which is manila and I will send your number and wait for their call. So I received the call but the representative is not aware and familiar with the issue and she is not familiar with the rules and policies of the adverse party. Because of and settle the issue, I email a complaint again and another agent assigned to and We agree on the matter and send a document to understand the situation. It’s very clear only that I need to as for the statement of the account from the bank where the money transfer had been made. Nevertheless, I ask for another extension because due to covid-19 the processing and transformation are not easy. Now, my point is what is may defense because when I visit in the branch again to settle the unpaid bill again the old bill given to us which had big different from the latest one. and I have may time email send to them to give me the final bill based on the latest bill no reply until we visit the branch. I want to insert that every time that payment shall daily for two months notice send to us and payment will not be accepted if less than 1 month. and according to the agent, the Bayanihan shall be automatically applied without the approval of the adverse party and all payment shall return to sender without notification that payment had been returned. But the problem is we don’t want to avail because of additional interests which invalidate the contract because the party had no knowledge of the Bayanihan application. and in contract, both parties must agree on the facts.
The agent told you that the Bayanihan Act was “automatically applied.” While the law forced banks to offer a 30-day grace period, the Bangko Sentral ng Pilipinas (BSP) explicitly stated that borrowers had the right to opt-out and choose to continue paying their loans normally to avoid accruing interest on interest. In this matter, it requires your consent first before this act applies in your case. If you were sending money in good faith and the bank rejected it without sending you an SMS, email, or letter stating “Your payment was returned because you are under the Bayanihan program,” the bank caused the default. You cannot be penalized for non-payment when it was the bank’s system that actively rejected your money. If you find the situation troublesome, try to coordinate with the bank.
Good day Atty,
I have a real estate loan with a PAGIBIG. What if PAGIBIG only released an amount less than that from the approved loan amount as stipulated in the Notice of Approval (NOA), but the approved amount in NOA was already annotated in the title, and I can no longer shell out any amount to satisfy the percentage required for completion of the house construction due to some factors such as high cost of materials, changes in the house plan due to environmental factors such as soil grade, ground test and the weather conditions, including the restrictions brought by the pandemic, yet, i Am already satisfied with the constructed house, what should prevail over my obligation? Is it the released amount or the one annotated in the title which is the original loan granted in the NOA? if the former, what will i do to have the annotation changed?
Your actual financial obligation will be based entirely on the released amount, not the original approved amount annotated on your title. As for the why did Pag-IBIG stop releasing the full amount. Pag-IBIG employs inspectors to check the site before releasing the next tranche of money. If your construction halted because you ran out of funds (due to inflation, soil adjustments, or reasonable delays), the inspectors would have noted that the house did not meet the 100% completion target required to release the final check. To make sure your title reflects your actual lower loan amount, you must undergo a process called Loan Takeout or Conversion, followed by an amendment of the mortgage text. You cannot do this alone; you must coordinate directly with Pag-IBIG.
Atty, what will happen if a portion of a parcel of land with improvements owned by different persons was mortgaged to the bank and was foreclosed? What will happen to the improvements? Will it also form part of the foreclosed portion of land? If so, the owner of the foreclosed position shall then indemnify the owners of the improvements? Thank you Atty.
Yes, the improvements generally form part of the foreclosure, but the bank or the new owner cannot simply steal them. The owner of the land must indeed indemnify the owners of the improvements under specific legal conditions.
Hi Atty. May i ask who is liable to pay the real property tax of the morgaged property? the mortgagor or the mortgagee? Thank you
The liability to pay rest on the mortgagor.
Good day Atty.,
A portion of a parcel of land is mortgaged to my father for more than 30 years now. Can we deny the right of the successor of the mortgagor to redeem the property? In what instances may the ownership be transferred to my father?
No, you cannot simply deny the successor’s right to redeem the property through a casual refusal, but you can legally deny it if their right to do so has already “prescribed” (expired) under the law. Furthermore, ownership does not automatically transfer to your father; specific legal steps must be taken.
Hi so I am the lender in the loan agreement. The loan agreement has collateral. ( 3% of the land) the principal the borrower owes me is ?100.000. With 1.5% monthly interest or 9%-18% APR and 3% penalty fee. now my question is the percentage i Imposed is not against the law of the Philippines? What mortgage deed form would i used And under what civil code?And what form of contract agreement would I use for a loan agreement? And under what civil code of loan of agreement would I base?Thankyou for your help
Under the law, there is no fixed legal maximum interest rate int he Philippines. In your case, this is generally considered reasonable and not usurious. The 3% penalty fee may be challenged if it results in an oppressive burden. So, your rates are not automatically illegal., but they must remail reasonable. For the forms, you would use a Real Estate Mortgage Deed, this is governed under Civil codes Article 2085-2123 on mortgages and also execute a Contract of Loan as the principal contact, this is governed with the same Code art. 1933-1953.
Atty,
Is Extrajudicial Settlement of Estate with Mortgage valid
It can be. Lacking details, we can only speak in general.
This article is very helpful. Quick question: currently selling a condo that is mortgaged. buyer would like to purchase the condo directly from the owner via installment payments over 15 years. will this fall under equitable mortgage? seller will still fulfill the terms of the initial mortgage with the bank.
thanks.
No, this transaction does not fall under an equitable mortgage. In your scenario, you are doing the exact opposite: you are not borrowing money and using your condo as collateral. Instead, you are executing a genuine sale where you act as the direct lender (in-house financing) for your buyer.
Under Philippine law, this specific setup is called a Contract to Sell with an Assumption of Mortgage (or an internal installment sale). However, selling a bank-mortgaged condo over a 15-year installment period carries massive legal and financial risks for you as the seller. Here is a breakdown of why this isn’t an equitable mortgage, the hidden traps you face, and how you must structure it to protect yourself.
Atty, what then is the remedy of the bank or the mortgagee when the property is sold to a third party? Should the plaintiff file a motion to include the third party as a party to the case?
Under the Civil Code, a mortgage is a real right. It attaches to the property itself, not just to the person of the debtor. This means that even if the mortgagor sells the property to a third party, the mortgage remains enforceable against the property. The third-party buyer acquires the property subject to the existing mortgage. If foreclosure is initiated, the buyer’s ownership can be affected, but the buyer is not personally liable for the debt unless they assumed it. The bank can proceed with foreclosure (judicial or extrajudicial under Act No. 3135) against the property, regardless of the transfer. The foreclosure sale will bind the third-party buyer because the mortgage is annotated on the title.
Hello Atty,
How about a mortgaged parcel of land has already been awarded to the mortgagee as per court decision, but the owner of the land still paying her dues to the mortgagee. Can the court decision be reversed once she is fully paid? The mortgagee still accepts her payments although several times in the past she had defaulted.
I entered into an deed of conditional sale with the owner of this property,btw. So what is or how high is the possibility that I can finally have this property since I am fully paid as per contract with no default whatsoever.
Thanks
Yes, the effect of the court decision can be practically reversed or rendered moot because the mortgagee continued to accept payments. However, your chance of successfully securing the property depends heavily on whether your contract was signed before or after the bank/lender took the case to court. It is recommended to seek a lawyer to have it look at the intersection of your Deed of Conditional Sale and the Court Decision already awarded to the mortgagee (the lender).
Atty, in the deed of mortgage one of the terms stipulated is that the mortgagee shall immediately take possession of the properties and may undertake such improvements or activities as he deems appropriate, is that a valid stipulation? thank you
The mortgagee does not automatically acquire possession or ownership of the property just because a mortgage exists. The mortgagee’s right is limited to foreclosing the property if the debtor defaults. A clause saying “the mortgagee shall immediately take possession of the properties and may undertake improvements or activities as he deems appropriate” is generally invalid. It violates the principle that “the creditor cannot appropriate the property for himself” (Civil Code Art. 2088).
Atty.,
If the proceeds of the auction is greater than the debt, to whom will the excess be given?
Thanks,
Tom
To the debtor.
Good afternoon atty, the land was mortgage in 2019. The title is now in mortgagee but owner’s name written in the title was wrong and his now dead. Does mortgagee has right to claim the property?thankyou
The property would have to go through auction before the mortgagee could come into ownership of it.
Good day Attorney.
What if a property was mortgaged equitably in 1970s in the amount of P200. The original owner of the said property died already and the one’s managing it are her relatives who want to redeem it for the same amount of P200 however the mortgagee refuses to accept the aforementioned amount of money. They reasoned out that they should pay such amount which corresponds to the appreciation value of the P200 due to inflation.
Are they correct in saying that?
In an equitable mortgage, the amount to be paid back is the loan obligation itself, the principal plus any interest or penalties that were agreed upon in the contract. If the contract only said ?200 and did not mention interest or escalation, then legally, only ?200 is due. The Civil Code (Arts. 1602–1604) protects borrowers in equitable mortgages by treating disguised sales as mortgages, but it does not allow creditors to invent new terms later. The mortgagee’s argument that the relatives must pay “the appreciated value of ?200 due to inflation” has no legal basis. If the relatives tender ?200 (plus any stipulated interest/penalty) and the mortgagee refuses, they can consign the payment in court.
Can a mortgaged property be rented out?
Yes.
Hello atty. We are 3 siblings and the owner of the land are our parents. What happens when the owner (parents) passes away? Will the property go to the principal debtor or kailangan ng last will & testament?
In succession rule, the last will and testament will no longer required since the owner of the property is deceased. the land will go to the heirs; the property does not automatically go to the principal debtor. The debtor only rights if there is a valid loan secured by mortgage.
i have missed 4 monthly payments and the bank refused to accept anymore payments. they refused all negotiation attempts i made like paying all arrears plus interest. Can the Fria insolvency law help me to have my loan rehabilitated so that bank accepts my offer to pay all arrears via installment and i can keep my home?
As an individual, if you file for a Suspension of Payments under the FRIA law to stop the bank it does not apply. The bank can legally ignore your court filing, refuse your installment offer anyway, and proceed with the extrajudicial foreclosure of your home. If the bank is refusing to accept your payment, you can use Article 1256 of the Civil Code, which is called Consignation. Have a lawyer draft a formal tender of payment for the 4 months of arrears plus interest. If the bank rejects it in writing, your lawyer will file a petition in court to deposit the money directly with the regional trial court clerk. Once the money is deposited with the court, the law considers your arrears “paid,” and you can ask the judge to enjoin (stop) the bank from foreclosing your home because you acted in good faith to cure the default.
Hi atty. my brother sold his property under mortgaged in rcbc to my bestftiend. Upon assumption my vestfriend paid my brother the amount equivalent to all the payments made by my brother and also she continue the amortization monthly to rcbc with the remaining terms still under the name of my brother. They enter into a contrct of ABsolute sale and assumption of mortgage. After it was notarized what’are the next steps?
This is an incredibly common arrangement, but because your brother and your best friend chose to execute a Deed of Absolute Sale with Assumption of Mortgage without the bank’s initial involvement, they have entered into what property law calls an “informal or private assumption.”
Right now, the bank (RCBC) has no legal idea that this sale happened. On RCBC’s books, your brother is still the 100% legal debtor, and the title is safely locked in RCBC’s vault under his name.
To protect your best friend’s money and ensure she actually gets the land title later, they must urgently transition this from a private contract into an official bank approval.
Atty. land was mortgage in the 90s. The owner died ten years ago has no spouse and children’s, now nephews want to redeem the property. Do they have the right to do that?
Under the law, nieces and nephews can step in by representation, meaning they step into the place of their parent who was the deceased. Provided that compulsory heirs do not exist.
Quiry
My friend ask this her friend mortgage the land to her. The storm came after that disaster there was a big log on the mortgage property/ land. Who will have the right with the said log?
Naturally, it will belong to the owner of the land. Mortgage property does not mean transfer of ownership, it is only a security interest, in plain words, it is just collateral. In you situation, it is best to divide the log brought the storm to prevent unreasonable chaos.
My Uncle(mortgagee) and my Dad(mortgagor) had deed of mortgage in late 1999. They had a witness, and papers were notarized.
The property was sold to another relatives in early 2003 without paying off the deed of mortgage. We have a copy of deed of mortgage.How do we go on proceedings to collect..new owner or prior owner? Do we have stand to take ownership of property due to unpaid debts? Please let me know your thoughts on this. Thanks!
A mortgagor cannot collect the debt. Your dad is the one who borrowed the money and pledged the property as security. So, in your family’s situation, only your uncle (the Mortgagee) holds the legal right to demand payment. Your Dad (the Mortgagor) has no standing to collect. as for the ownership rule. If the mortgage was registered at the RD, the sale is valid, but burdened. there is no guarantee of protection for the new owner. If the mortgage was not registered, the title looked perfectly clean before the sale, this means that the buyer was executed on purchasing the title in good faith. The new relative takes 100% clean ownership of the property. The mortgage effectively dies as a property claim.
Hi Atty, Good day. We have entered into a real estate mortgage payable for 3 years term with monthly interest. It’s been three months since the payment started (principal divided by 36 months + monthly interest), now we want to terminate the contract, are we still liable to pay the remaining monthly interest up to 3 years or only the remaining principal amount? There is no such thing indicated in the contract about termination of contract. Thank You
Under Philippine law, you are NOT automatically liable to pay the remaining 33 months of interest if there is no explicit clause in your contract stating otherwise. You are only legally obligated to pay the remaining principal balance plus any interest that has accrued up to the exact day you pay off the debt. In this matter, I suggest you consult a lawyer that will help you navigate proper legal remedies.
Hello Attorney,
House mortgage been delinquent for 4 months with total value of 125,000 pesos. The developed gave us only 30 days to settle the total amount to update our payment or we will need to evacuate the house on the 30th of August, 2019.
We asked them if we can staggered the payments of the delinquent amount on top of the monthly amortization, but they didn’t agree on our terms but told us to evacuate the house on the 30th of August.
What can we possibly do? Thanks
The developer CANNOT legally force you to evacuate or cancel your contract just because they rejected your installment offer. Under Philippine law, their 30-day demand to evacuate completely violates your statutory rights. You may send a formal, written reply to the developer’s credit and collection department to discuss the matter or file a complaint with the Department of Human Settlement and Urban Development (DHSUD).
atty, land was mortgage in the 90s, no written document, the title is with the mortgagee, the owners are now dead. the heirs wanted to redeem the property, can they recover it?
Sent an email.
Hi Atty. My question is that, what will the family do if the principal mortgagee of the house is no capacity to pay the mortgage now because of the accident, he is disable now, and his wife has no work?
Please Help.
Thank you.
The family can formally request the lender to restructure the loan (longer term, lower monthly payments). Lenders sometimes allow this in cases of hardship.
Good day! Atty.! My friend has a problem regarding a land mortgage, the lending institution made her sign a Deeds of Absolute Sale and demanded for the original title. There are no payment to be made, the institution gathered the requirements only together with the DOAS. Is it okay to give them the original title in exchange of money? She only wants to mortgage her piece of land.
If your friend only wants to mortgage her land, she should never sign a Deed of Absolute Sale. Signing a DOAS + surrendering the original title means she is effectively selling the property, not mortgaging it. Insist on a Real Estate Mortgage Deed. This is the correct form for loans secured by land. Register the mortgage with the Registry of Deeds so it is binding and properly annotated on the title.
Atty., after a year I am a good payee to my home mortgage, when they issue the new interest rate I calculated that I can no longer be able to pay as it will heavily affect me and my family financially. I decided not to issue another sets of checks and inform the bank and the agent that I will surrender the house and fully understand that all my previous payment are deemed profit. But the bank insist that I have to pay another month as my mortgage cancellation is still on process. Do I have to do another payment in the future?
Sincerely,
-Mel
It will depend on the agreement between you and the bank.
Atty i need your advice. We mortgage our house and lot of one financing company for the term of 3 years with 4.5percent per month. And now we did not pay our month due for 9months. We decide to sale the house so that we can pay the loan. The main problem they want us to pay the exact 3years of perion but actually we just get a loam las nov. 2019. And they want us yo pay 6.3million from 1.7million loan. Please give us and advice ASAP. Thank you
You may raise this concern in court. Courts in the Philippines have repeatedly ruled that interest rates which are excessive, iniquitous, or unconscionable can be reduced. Lenders may demand full payment if you default. But they cannot arbitrarily inflate the debt. Only the principal + agreed interest + penalties are enforceable. If you cannot settle, the lender may foreclose the mortgage judicially or extrajudicially.
Hi Atty,
The term of my loan ended last March 30, 2021. But the bank refused to release the land title as my collateral after paying the whole amount because accordingly I signed a mortage agreement that my collateral will be released by December 2021. Is their such a way that i can get back my title before December considering that already have fully paid my loan?
We suggest first elevating it within the bank.
How many times to pay a mortgage with the loan for a property? Is it once until paid or is it every year?
That’s depends on depends on the loan agreement and on the terms set by the bank or lending institution.
Good day Atty., I entered into a mortgage contract due to fact that I would like to save the mortgaged lot from bank foreclosure. I secured the amount due to the bank for the release of the title on their promise that the title will be divided and with 4% monthly interest on the money used in paying the bank. Furthermore they assured me that they will settle it within three months. But happened is that they refused to divide the title as they promised and nonpayment on the interests and the priincipal amount for almost 15 yrs now. Worst thing the informed that there is bill enacted placing a 6% yearly interest on borrowed money and that is how they will pay me.. From this, may I know if there is bill passed on this matter and it’s effectivity if ever. Will it cover notarized agreement done before? Thanks
The 6% yearly interest under the Bangko Sentral Ng Pilipinas Cicular No. 799 was reinforced by the Supreme Court. However, this 6% rate only applies in two specific scenarios. When a court order someone to pay damages/debts, and when two parties agree to a loan but fail to write down an exact interest rate.
Base on the information you provided, the law explicitly states that the 6% legal interest applies only in the absence of an express contract as to such rate. In your case, it is not applicable because you have notarized, written contract statin a 4% monthly interest. Furthermore, laws and BSP circulars do not have a retroactive effect to impair or change valid, pre-existing private contracts.
Hi Atty,
My sister and father have entered into a mortgage. My father is OFW and is 60 yrs old at the time or mortgage. Now they are unable to make the payment but they aren’t willing to refund the $80,000.00 3 mons payment. it is PHP21,000 per month. My sister works in a call center company and doesn’t earn much. – her salary is PHP 25,000/mo gross. I believe that there is a negligence of the assessment of the mortgage because they shouldn’t have been approved in the first place.
Given the situation has already developed, then you must take this up with the lending institution that extended the mortgage. It may be possible to negotiate with them.
Is it true that one only has 10 years to collect on a mortgage? What happens after 10 years?
Generally, a mortgage can only be enforced in court within 10 years for the time the borrower fails to pay. After 10 years, the creditor loses the right to foreclose or sue for collection.
How about atty the contract that they call “sangla-tira” for 50k. their aggrement was for 2 years and was change to interest rate of 3%/month way back 2017. the thing is the only thing written in the contact was the sangla-tira/mortgage but the interest rate/5,6 was verbal. the 50k was already paid back, but the interest, suming up to 72k was still not. what law does it cover atty? do we still have to pay the interest?
Under the law, you do NOT legally have to pay the remaining verbal interest. Since the ?50,000 principal has already been paid back, the entire debt obligation is technically extinguished.
Good pm po. Is sangla equivalent to equitable mortgage? No contract has been made during the sanglaan. Thank you.
Sangla is the slang term for mortgage. Under the law, any certain agreements must be in writing to be legally enforceable. In your case, where no writing instrument involved, it will be hard on your end to prove that the property is under mortgage. In this case, you have to prove in court (if dispute arise) using parol evidence.
Can a property co owned by a Minor be mortgaged?
If one of the co?owners is a minor, the minor cannot legally sign contracts. A minor’s share can only be mortgaged if the legal guardian acts on their behalf.
Atty, can a US citizen enter into a mortgage contract as the mortgagee? Therefore will own the land if foreclosed
A foreign citizen can only own land when they inherit it through intestate succession.
What extinguishes a mortgage contract?
A mortgage contract can be extinguished in two primary ways: indirectly, when the debtor fully pays off the underlying loan or directly, even without loan payment, through the formal foreclosure and public auction of the property.
Is mortgage contract can be used to transfer property to creditor if the debtor fails to pay within the specified allocated time?
Thanks
If the mortgagor fails to pay the loan within the agreed time, the creditor cannot automatically take ownership of the property. Instead, there are two possible paths:
1.Judicial Foreclosure – The creditor files a petition in court. The court hears the case and, if the claim is proven, issues an order for foreclosure and the sale of the property.
2. Extrajudicial Foreclosure (Act No. 3135) – This is allowed if the mortgage contract contains a special power of attorney clause authorizing the creditor to foreclose without going to court. In this case, the creditor files a petition with the sheriff or a notary public to initiate the foreclosure process.
Good day. The creditor demanded the interest of 10 pct. Per month, and didnt register the mortgage property at the registry of deeds. The debtor is willing to pay but the creditor is at large and cannot be located.. What shoud we do? We purchased a portion of lot and the mother title is kept by the creditor. Pls help
The creditor demanded 10% interest per month. This is extremely high and may be considered unconscionable by the courts. Since the creditor is holding the mother title, you may file a case to compel delivery of the title once the debt is settled or courts can order the Registry of Deeds to issue a new owner’s duplicate if the creditor refuses to surrender the title. What you can practically do is to consult a lawyer to file the proper case.
Hi! Attorney I just want to ask some legal advice regarding.my Deed of mortgage between me and my relative.we did a agreed for a loan agreement with her house and lot amounting 100,000.00php with a signed “deed of mortgage”. In that signed paper agreement there wasn’t any interest rate agreed and no expiry of validity except that I she agreed to let me use some portion of the land for me to use for any improvement or business plan to decide.and after she got and spent the money on the same month she asked for additional loan twice of amounting 16,000.00php with a separate signed written agreement and after that,she asked again for another 35,000.00php but I didn’t agreed because it’s already some kind of abuse. All the money I payed her was given to her by my sister of my behalf. after that incident she got mad and didn’t allowed me to use any portion of her land in which we agreed upon signed with deed of mortgage contract despite of many times I ask her to for my rights in which we had agreed. The most hated part is she was selling the property without my knowing and doesn’t want her buyer to know that the house and lot was under my mortgage.for almost 7 yrs since the mortgage was done she never show any effort or good faith to pay any amount but instead of having good faith she throw bad words on my part and she didn’t even acknowledge and denied the money she got in addition to the amount mortgaged.As a protection to my money she accepted as mortgage and because of the almost seven years not showing any effort to pay and not fulfilling the agreement she agreed upon I would like to implied an interest for my money. Do I have the right to ask for interest for more than 6 years that she didn’t follow the agreement?
On the matter can you charge her an interest for the past 7 years? No. Under the law, no interest shall be due unless it has been expressly stipulated in wiritng. Since your original Deed of Mortgage and the second agreement did not state an interets rate, the loan is legally considered interest free for the period that it was running. However, in Supreme court cases, a debtor only incurs interest as a penalty for delay after a judicial or extrajudicial demand is made. In this case, you or the court mays end a notarized or court order of Final Demand Letter giving her a specific period to pay the full amount. If she fails to pay after that deadline, she is in legal default. From that exact day forward, a legal interest rate of 6% per annum (yearly) will automatically apply to her debt by law, even if it wasn’t written in your original contract. On the question, can she sell the property, yes she can sell it. But the buyer must respect your mortgage, provided you register it. If your deed of mortgage is registered and annotated, she can sell it but the buyer takes the property with the liens attached. If not registered, the mortgage is still valid between you and your relative, but an innocent buyer who doesn’t know about it might buy the land “clean.”
Atty, i contracted to an agreement on land mortgage. Is it valid if it was done through written method and the details of the said land was not included on the written agreement? On what account to become valid? Thank you
Yes, it can be enough if it identifies the property sufficiently. It has to be recorded at the register of deeds to be binding on third persons.
I have 3 questions
1. If im an individual who is the creditor or the mortgagee, do i need to register as a pawn shop in sec or dti?
2. In the contract it is specified that if the principal was not paid after the set date the loan will continue without the need of executing another contract, is this clause valid?
3. In foreclosure, can we arrange it internally in good faith and just sold the property to me without going through court and auction?
1. Not necessarily, as long as the contracts legally notarized.
2. A clause saying the loan continues if unpaid is generally valid. But courts may interpret it as an automatic renewal or extension, which must still comply with fairness and agreed terms. What matters is that the principal obligation remains enforceable until paid.
3. No, you cannot bypass foreclosure procedure. For faster route, you can foreclose though extrajudicial foreclosure provided that the mortgage has a Special Power Attorney clause.
What if the debt was paid but not register in registry of deeds or no mortgage stamp for settle contract?
Under the law, the payment extinguishes the loan. Because a mortgage is merely an accessory contract, the mortgage is also technically dead. The lender can no longer foreclose on your property because there is no more debt to enforce. Leaving the title un-cancelled creates a cloud on the title that causes several major roadblocks. You cannot sell the property, you cannot use it as collateral, and there will be an estate complication.