The interest should of course be fixed at not more than the legal rate. It is computed from the day stated in the bond (usually the day the bond is dated) and is payable on a fixed date thereafter, and then in regular instalments, usually semi-annually, some times quarterly or even monthly. It is not paid in advance. The lender often specifies the interest days desired by him. Some savings banks have a rule that interest on all mortgages held by them be paid on the same interest days.
4. Default in the payment of interest and taxes.— The holder of a properly prepared bond has the op tion of considering the entire principal due if there is any default in the payment of interest for thirty days, or if taxes or assessments on the mortgaged premises remain unpaid for thirty days. This pro vision protects the lender who has advanced money on the security of the bond and mortgage. Without this provision, in case of default, suit would have to be brought separately on each instalment of interest and the lender would be without power to require the owner to pay the taxes and assessments on the land. Hence the power contained in this provision adds to the security of the loan. The holder of the bond has, of course, the right to waive any default, and can re instate the credit even after he has exercised his op tion. Mere forbearance to take action does not mean a waiveriof the default, but if interest or taxes be paid before the option is exercised, the option is con sidered waived.
5. Execution and enforcement of the obligor must execute the bond. It is usually sealed because there are longer legal limitations on a sealed instrument. The statute of limitations begins to run from the due date, or the last time there was an ac knowledgment of the obligation—as by payment of interest upon it. A bond need not be witnessed or acknowledged to be enforceable, but it is often both witnessed and acknowledged.
The holder of the bond can enforce it by foreclos ing the mortgage which accompanies it, or he may bring suit on the bond. If be sues on the bond, he must exhaust his remedies under that instrument be fore he can enforce the mortgage, but he may fore close the mortgage in the first instance, and ask for a judgment against the bondsman for any deficiency that may arise on a sale of the property.
6. Form of bond we have analyzed is an evidence of the debt; the mortgage is given as security for the debt. While there are a number of mortgage forms in general use, the fol lowing may be taken as a specimen of what the com plete instrument should contain.
7. Parties to the mortgage.—The party of the first part is the owner of the property, and is often re ferred to as the mortgagor. The party of the second part is the person to whom the debt is payable, the lender or the representative of the lender, usually called the mortgagee. It is customary that the wife of the owner join in the mortgage in order that it may be a lien superior to her dower rights. The se curity is defective unless she does bar her dower, where by law she would be entitled to dower. In the Province of Ontario, Nova Scotia, New Brunswick, Prince Edward Island, a wife is entitled to dower and in British Columbia to a limited extent. It is not necessary that the wife join in the bond.
8. Recital of the after the names of the parties there is a reference to the debt which the mortgage is made to secure. A blank space is left in which to insert the name of the maker of the bond. ' As a general rule, he is the same person as the maker of the mortgage, but in some cases a mortgage is made to secure the debt of a third party, as, for example where a wife mortgages her property to secure her husband's indebtedness. The bond is described as "bearing even date herewith." It is usual and customary that both bond and mortgage be dated alike, yet there is no reason why a mortgage should not be given to secure an antecedent debt.
The due date of the principal sum, the rate of inter est and the times when the interest is payable are stated. In the next paragraph provision is made that upon default in the payment of interest, taxes or assessments, the whole principal sum may become due.
9. Mortgaged premises in ques tion should be described in the mortgage as carefully as they would be in a deed. The granting clause and the habendum follow the language of the deed. It is stipulated, however, that the conveyance is made to furnish better security for the payment of the principal sum and interest.