CONTRACT SUBJECT TO MORTGAGE

A contract of sale of land entered into in expectation of some loan should be made conditional upon your client (purchaser/borrower) obtaining the loan. The contract should also provide that in the event that the loan is not obtained, the vendor shall return the deposit paid by the purchaser; this is what is referred to as contract subject to a mortgage as stated by Law Repository. 

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CONDITIONS FOR THE VALIDITY OF THE SUBJECT TO MORTGAGE CLAUSE IN A CONTRACT OF SALE OF LAND

1.It must state the source and amount of the loan.

2.The terms of payment; and

3.The interest paid on the loan.

Here is a model subject to mortgage clause in a contract of sale of land:

“This contract of sale is conditional on the purchaser obtaining a mortgage loan from BETTER BANK LTD in the sum of N5,000,000 (five million naira) with interest payable at the rate of 12% PROVIDED THAT where the loan is not obtained on completion, this contract of sale shall be void and the purchaser shall be entitled to the return of the deposit paid."

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