A Banker Asked Us: Determining The Amount Of A Québec Hypothec - Finance and Banking - Canada

Hypothec additional income


To print this article, all you need is to be registered or login on Mondaq. Our borrower wants to know why the amount of the hypothec is larger than the aggregate amount of the credit facilities.

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Being an essential stipulation, the hypothec additional income of the hypothec cannot be changed by an amending agreement and this is the reason why the amount of the hypothec must be sufficient to secure the obligations described therein.

The amount of a hypothec is largely theoretical because a hypothec is an accessory: when exercising its rights under a hypothec, a lender can only obtain the amount that is actually owed to it, regardless of the amount of the hypothec, insofar as the amount is large enough to cover such secured obligations.

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For this reason, it is hypothec additional income to err on the side of caution and stipulate a larger amount than necessary. The benefits of this practice are twofold: they protect the lender's rights by ensuring that all obligations are guaranteed by the hypothec, but they also hypothec additional income borrowers the cost of having to prepare and grant a new hypothec every time credit facilities are increased.

Therefore it is preferable for the lender to take a single hypothec in an amount large enough and containing a description hypothec additional income guaranteed obligations broad enough to allow some flexibility in this respect.

Therefore, any legal fees incurred by the lender for the recovery of principal and interest or for conserving the charged property cannot be included as part of the "costs" secured by the additional hypothec.

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The additional hypothec can be presented textually in two ways: it is either included in the overall amount of the hypothec in a single clause stipulating the total amount, or the amount of the hypothec is initially stipulated in a principal hypothec clause as an amount equal to the total amount of the credit facilities, with the additional hypothec stipulated in a separate clause known as the "additional hypothec clause".

Finally, it should be noted that the amount of a hypothec must always be stated in Canadian dollars.

Updated Oct 30, What Is Hypothecation? Hypothecation occurs when an asset is pledged as collateral to secure a loan. The owner of the asset does not give up title, possession, or ownership rights, such as income generated by the asset. However, the lender can seize the asset if the terms of the agreement are not met. A rental property, for example, may undergo hypothecation as collateral against a mortgage issued by a bank.

For that reason, in cases where the credit facilities are stipulated in foreign currency, the amount of the hypothec is adjusted in consequence. For example, where credit facilities are stipulated in U.

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In the same way, where credit facilities are stipulated in Euros, for example, an even higher principal amount would be stipulated. The content of this article is intended to provide a general guide to the subject matter.

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Specialist advice should be sought about your specific circumstances.