Mortgage, in English law, is a contract whereby property is transferred to a creditor by way of security for money advanced. A mortgage of land is, in form, an absolute conveyance, subject to a proviso that, if the money lent is repaid within a certain time, the mortgagor shall reconvey the land to the mortgager or borrower. Even when the time fixed has expired, equity will permit the mortgager to redeem his property on payment of his debt: if he proves unable to do so, the mortgagee may apply to the court for a sale of the property, or for foreclosure—i.e. for a decree which deprives the mortgager of his right to redeem and transfers the property absolutely to the mortgagee. A mortgagee may also, as a general rule, enter into possession of the land and draw the rents and profits; or he may sue the mortgager for payment of the money due. Further rights may be given him by agreement, and it was formerly usual to stipulate for large powers over the property. The Conveyancing Act of 1881 now regulates the powers exercised by mortgager and mortgagee respectively, unless in so far as its provisions are excluded by express agreement. An equitable mortgage is effected when an owner of property binds himself by memorandum or otherwise to execute a formal mortgage. A person who deposits the title-deeds of his land with a banker, as a security for money advanced, is an equitable mortgager. Mortgage deeds do not, with certain exceptions, require Registration (q.v.). An owner who has mortgaged not unfrequently obtains further advances on the security of a second or third mortgage of the same property. A third mortgagee who buys up the first and gets possession of the title-deeds is permitted to tack the first and third mortgages together: both will have to be paid off before the second. There are also cases in which a mortgagee is permitted to consolidate claims against different properties of the same debtor, requiring him to pay off all or none. No trustee is justified in advancing money on security of any but a first mortgage; and in every case a trustee is bound to see that the value of the property is amply sufficient to secure the amount advanced. See on this point the Trustee Act, 1888.
A mortgage of goods is made by means of the deed known as a Bill of Sale (q.v.). Shares, policies of insurance, and even debts, may be mortgaged by using the appropriate forms of transfer. In all cases, whatever the nature of the property, the Conveyancing Act enables the mortgagee to obtain a sale of the property, if the mortgager is unable to pay principal and interest. See Coote's Law of Mortgage (5th ed. 2 vols. 1884).
In Scotland mortgages are effected by means of a Bond and Disposition in Security (see BOND). Mortgages are a higher and better form of security than in England, because of the system of registration of deeds affecting land (see SASINE); and trustees have power to invest in mortgage securities, which are considered as safe as government stock, and less liable to fluctuations of interest. In Scotland it is not the practice to mortgage lands by mere deposit of title-deeds.
In the United States the form and incidents of a mortgage are regulated by the laws of each state. Except in Louisiana, the English law seems to have been accepted on the basis of American legislation. The Homestead Laws (q.v.) enacted by several states have an important influence on the law of mortgage. See L. A. Jones, Law of Mortgages (3d ed. Boston, 1888).