If you are a borrower, guarantor or lender, you may be required to seek independent legal advice prior to signing mortgage documents. Loan and mortgage documents will often require an Independent Solicitors’ Certificate to prove that you have received legal advice from a solicitor prior to signing your documents.

If you need to execute mortgage documents, it is important to know that this process involves more than a simple signature.

What is a mortgage?

A mortgage is a type of security for a loan used to purchase a property. There are a number of parties involved in this form of legal agreement.

• A lender loans funds to the person or business wishing to purchase the property with the expectation that the funds will be repaid.
• A borrower receives funds from the lender with the promise of repayment.
• If a borrower defaults on their loan, a guarantor can make an agreement to repay the borrowers’ debt in the form of a guarantee.

Why do you need independent legal advice to sign mortgage documents?

A lender may request an Independent Solicitors’ Certificate to confirm that the terms of the mortgage and loan have been explained to, and understood by, the borrower or guarantor. It is the solicitor’s responsibility to advise the signatory of the conditions of the loan and mortgage to ensure that all parties comply with their obligations.

Accordingly, an Independent Solicitors’ Certificate verifies that the borrower or guarantor has been informed of their rights, liabilities and obligations under the conditions of the loan agreement and mortgage.

What legal advice will my solicitor offer on mortgage documents?

Solicitors must comply with the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015 when providing advice on loan and security documents.

Your solicitor should verify your identity and provide evidence of advice in the form of an approved Law Society of NSW declaration or acknowledgment.

Your solicitor may advise you on the following areas:

• The costs and interest incurred by the borrower in failing to make regular payments on time.
• The legal obligations of the guarantor in rectifying the borrower’s default on payments to the lender.
• Potential legal action against the borrower or guarantor for non-compliance with the terms of the loan agreement. This may include the possession and sale of the borrower or guarantor’s property to satisfy outstanding debts to the lender.

N.B. Your solicitor is not qualified to offer financial advice. Queries related to the financial aspects of the mortgage documents should be directed to a financial advisor or accountant.

How can I prepare for an appointment with my solicitor?

To avoid any complications when executing your mortgage documents, we recommend the following:

• Familiarise yourself with the terms of your loan or guarantee documents.
• Provide your solicitor with copies of your documentation in anticipation of your appointment.
• Explain the relevancy of the documents to all parties involved.
• Prepare a list of questions to clarify with your solicitor prior to signing your documents.

How can Etheringtons Solicitors help?

Becoming a borrower or guarantor can be a risky process if you are not aware of your rights and obligations. If you require independent legal advice on your mortgage documents, we recommend contacting our office in North Sydney on (02) 9963 9800 or via our online contact form.