Reasons to prove Financial responsibility of the borrower
Is a law which requires you to prove that you will be able to pay the loan amount back if your mortgage suffers ay irreparable damage and its value comes down to a great extent. This is a great law to protect the insurer from the losses and is important for you secure a loan against mortgage.
The mortgages, generally do not depreciate but in certain circumstances such as natural calamity where your property becomes useless or in cases where the land is acquired by the government agencies for the development processes the value of the property comes down considerably and the lender may suffer the loss. To prevent any type of loss to the lender it becomes the responsibility of the borrower to prove that the amount he is borrowing is not more than what he can pay in case of any irreparable damage happens to the mortgage.
This responsibility is generally required to be proven in the case of car loan or any type of auto loan but in case of land contracts too, the responsibility of the borrower is to prove that the loan amount can be paid by him in case the mortgage either depreciates in cost or undergoes some irreparable damage.
It is not necessary that the borrower must have insurance to fulfill this clause but the only thing that is mandatory is to prove their financial capability even when there is no fault f the borrower. This law is in the interest of the lender whose money is at stake.
- release of financial obligation
- transfer of financial responsibility form