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Alabama Mortgage

The short definition of a mortgage is that it's a loan used to purchase real property. In Alabama, the mortgage is comprised of two parts: the security instrument and the promissory note. A security instrument is a specific type of document that provides security for the lender and contains terms (agreements) that apply until the buyer (borrower) repays the lender according to terms defined in an attached promissory note.

While the lender holds legal title to the property during this time, the borrower holds equitable title, which means they may occupy the property as if they hold legal title, but until the loan has been repaid, the lender actually owns it. This is because mortgages involve a lien against the property, held as security, that ends when the debt is repaid and the owner assumes legal title (after recording a release of mortgage).

The buyer must also complete a promissory note. A promissory note is a negotiable instrument that contains an unconditional written promise, signed by the borrower, to repay the lender or its designated agent. It defines the amount and specific terms of the loan between the borrower and the lender, and must be completed at the same time as the security instrument. Many lenders retain the promissory note for the duration of the mortgage and return it to the borrower after the debt is repaid.

The Code of Alabama sets forth the rules for mortgages in that state at Title 35 Section 10, but does not provide a statutory form for security instruments. A typical mortgage includes the names of all borrowers (and their spouses, if applicable), information about the lending institution, the date the borrower signed the promissory note, the property county and address, and a legal description of the property. The borrower must indicate if the security instrument includes any riders, or attachments that amend or supplement a document.

The mortgage must be signed by each borrower and acknowledged by an authorized individual. Alabama requires spouses' signatures for mortgages of single-family owner-occupied dwellings ("homestead mortgages"), even if they are not borrowers (Ala. Code Sec. 6-10-3). A homestead is defined in Alabama as a single-family owner-occupied dwelling.

Security instruments must meet standards of form and content for recording documents relating to real property. Record the completed mortgage at the local probate office.

Consult a lawyer with questions regarding mortgages or for any other issues related to transferring real property in Alabama. Alabama Mortgage Forms Have Been Updated as Recently as Thursday January 17, 2019

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Alabama Mortgage Form