This article explains how Philippine law treats a real estate mortgage when the loan is taken by one person (the borrower) but the property given as security is titled to someone else (the owner). It unpacks the validity of the mortgage, each party’s rights and liabilities, registration and foreclosure rules, and common pitfalls in practice.

I. Core Concepts

1) Mortgage is an accessory real right

A real estate mortgage (REM) is an accessory contract securing fulfillment of a principal obligation (usually a loan). It creates a real right over immovable property, allowing the creditor to foreclose the property if the debt is not paid.

2) Who may mortgage

As a rule, only the owner (or a duly authorized representative) may constitute a valid mortgage on real property. A person cannot give a real right over property they do not own (“nemo dat quod non habet”). Thus:

A mortgage executed by a non-owner without the owner’s authority is void as a mortgage. The loan may still be valid personally against the borrower, but the property cannot be reached through that void mortgage.
A mortgage executed by the titled owner to secure another person’s loan is perfectly valid. This is commonly called a third-party mortgage.

3) “Borrower” vs “Owner/Mortgagor”

Borrower/Debtor: the person who owes the loan.
Owner/Mortgagor: the person who gives the property as security. The mortgagor can be the borrower or a third party.

II. Validity Requirements When Owner and Borrower Are Different

A. Owner’s consent and capacity

The owner must voluntarily mortgage the property and must have capacity to alienate (e.g., not a minor; not under interdiction).
If done through an agent, the agent must hold a Special Power of Attorney (SPA) specifically authorizing mortgage (general authority is not enough). For registrability, the SPA should be notarized.

B. Form and registration

Form: The mortgage must be in a public instrument (acknowledged before a notary).
Registration: To bind third persons, the mortgage must be recorded/annotated on the owner’s Transfer Certificate of Title (TCT) or Original Certificate of Title (OCT) at the Registry of Deeds (RD) where the land is located. Between the parties, the mortgage is effective upon perfection, but priority and enforceability against third parties arise from registration.
Documentary requirements (practice-based): notarized REM; tax declarations for unregistered land; owner’s duplicate title; Real Property Tax clearance; documentary stamp tax (DST) proof; RD fees.

C. Property description and extent

The instrument must identify the property with sufficient precision (title number, lot and block, area, technical description if needed).
The mortgage generally covers the land and its accessions (buildings, improvements) unless the parties stipulate otherwise and titles are split.

III. Common Ownership and Status Scenarios

1) Spouses and family home

If the titled property is community property (Art. 96, Family Code) or conjugal partnership property (Art. 124), both spouses must consent to mortgage; absence of consent renders the disposition void (subject to limited exceptions by court authorization).
Family Home: While generally exempt from execution, it may be mortgaged with required spousal consent. Mortgagee should still verify that the loan falls within exceptions if relying on execution later.

2) Co-ownership

A co-owner may mortgage only his/her undivided share. Without all co-owners’ consent, the mortgage attaches only to the mortgagor’s eventual share after partition, not to the entire property.

3) Property of minors or persons under guardianship

A mortgage over property owned by a minor or an incompetent requires proper court approval (via guardianship proceedings) and compliance with special formalities.

4) Estate property (decedent’s estate)

If title remains in the name of a deceased owner, the executor/administrator may mortgage only with court authority and in conformity with settlement proceedings. A mortgage signed by an heir before partition does not bind the whole, only that heir’s eventual share.

5) Corporate or association property

Corporate-owned land may be mortgaged with board approval and by duly authorized officers; check board resolutions, secretary’s certificate, and AOI/By-Laws for authority.

6) Unregistered land

For unregistered land, registration is with the Registry of Deeds (primary entry book and registration book for unregistered lands); the mortgage still binds third persons upon proper recording, but due diligence is heightened because ownership may be evidenced by tax declarations and possession rather than a TCT/OCT.

IV. Types of “Mortgage on Property Titled to Another”

A. Third-Party Mortgage (TPM)

Definition: A property owner (the third party) mortgages his/her property to secure someone else’s debt.
Validity: Valid if the owner signs the REM (or via SPA). No need for the owner to be a co-borrower unless the creditor requires it.
Scope of liability: The third-party mortgagor is not personally liable for the loan unless they also signed as solidary debtor/surety. Liability is in rem (limited to the property) unless they assume personal liability.

B. Accommodation mortgages and suretyship

Sometimes lenders require the owner to sign not just the REM but also as co-maker/surety. In that case the owner becomes personally liable; the creditor may obtain a deficiency judgment against the owner after foreclosure, subject to the loan and surety terms.

C. “Mortgage by a non-owner”

No authority from owner: The REM is void as to the property. The lender may sue the borrower personally on the loan, but cannot foreclose the property.
Apparent ownership issues: Title investigations should detect mismatches between signatory and titled owner. Reliance on unverified claims or defective authority exposes the lender to a void security.

V. Rights and Remedies of the Parties

1) Rights of the Borrower (who may not be the owner)

Use of third-party collateral: May arrange for an owner to mortgage property to secure the borrower’s debt (with the owner’s consent).
Cure/Payment: May cure default before foreclosure per loan terms; payment extinguishes both loan and mortgage.
No automatic rights over the property: The borrower has no proprietary rights to the third party’s property; cannot dispose of or encumber it.
Reimbursement/Security (if borrower is also an owner of other collateral): Subject to contract.

2) Rights of the Owner/Mortgagor (who may not be the borrower)

Control over disposition: Owner may negotiate the loan terms tied to the mortgage (e.g., limiting liability to the property; barring personal liability).
Right to notice: In foreclosure (especially extrajudicial), the mortgagor is entitled to statutory notices of sale and publication requirements; defects may invalidate the sale.
Right to redeem / equity of redemption:
- Judicial foreclosure: Owner has equity of redemption (period before confirmation of sale).
- Extrajudicial foreclosure (Act No. 3135): Owner (and sometimes successors) have a statutory right of redemption, generally within one (1) year from the date of registration of the foreclosure sale, unless special laws/charters stipulate otherwise.
Right to subrogation upon payment: If the owner pays the loan to save the property, the owner is legally subrogated to the creditor’s rights against the borrower (may recover from the borrower what was paid, plus lawful interests and expenses).
Protection against deficiency: If the owner did not sign as surety/solidary debtor, the owner is typically not personally liable for any deficiency after foreclosure; the creditor pursues the borrower for any balance.

3) Rights of the Creditor/Mortgagee

Foreclosure on default, following statutory procedures (judicial or extrajudicial).
Priority according to time of registration; earlier-annotated mortgages generally rank ahead of later encumbrances.
Deficiency action: After foreclosure sale, creditor may sue the borrower (and any surety) for deficiency, subject to loan terms and special bank/financing laws.

VI. Foreclosure Pathways (and Why They Matter Here)

A. Extrajudicial Foreclosure (Act No. 3135)

Permitted if the REM contains a “special power to sell” (standard in bank forms).
Requirements include demand/default, posting and newspaper publication, and public auction.
Redemption: Typically one year from registration of the certificate of sale.
Effect on third-party mortgagor: Their title can be transferred by the foreclosure sale; if they were not personally liable, their exposure usually ends with the loss of the property (no personal deficiency unless separately bound).

B. Judicial Foreclosure (Rules of Court)

Filed as a civil action; after judgment and sale, buyer’s title is confirmed by the court.
Equity of redemption (no one-year statutory redemption unless a special law provides otherwise).
Costs and timelines are different; sometimes used if the extrajudicial route is unavailable or contested.

VII. Priority, Subsequent Buyers, and Other Encumbrances

First in time, stronger in right: Mortgage priority is governed by date and time of registration. A prior annotated mortgage prevails over later sales or encumbrances.
Buyer beware: A buyer of the mortgaged property takes it subject to the annotated mortgage. Due diligence includes getting a current RD-certified copy of title and a full encumbrances page.
Subsequent unregistered claims (e.g., unannotated leases, side agreements) do not defeat a registered mortgage.

VIII. Special Topics and Edge Cases

1) Partial interests and future accessions

The mortgage may validly cover only what the owner can give (e.g., a co-owner’s undivided share).
By default, a mortgage extends to accessions and improvements made by the owner, unless excluded.

2) Refinancing and subrogation by a new creditor

If a new lender pays off the old loan in reliance on the same property and documents, conventional subrogation may keep the security alive in the new lender’s favor, provided proper documentation and re-annotation.

3) Novation, restructuring, and release of mortgage

Changes to the principal obligation may or may not extinguish the mortgage depending on whether novation is extinctive and whether the mortgagor consented.
Cancellation of the mortgage requires the mortgagee’s Release/Deed of Cancellation and RD annotation.

4) Foreigners and corporations

Foreigners may be mortgagees (lenders) and may also mortgage property they validly own (e.g., a condominium unit within foreign ownership limits).
Domestic corporations may own and mortgage land subject to constitutional limits on foreign equity and land ownership.

5) Fraud, forged signatures, and stolen owner’s duplicate title

A mortgage based on a forged owner’s signature is void and does not bind the true owner. Even registration will not cure forgery.
Lenders mitigate risk through face-to-face KYC, specimen signature checks, and title verification directly with the RD (including e-RD or title trace where available).

IX. Practical Checklists

A. For Lenders

Verify title: Latest RD-certified copy; check all annotations.
Match signatories to title: If owner ≠ borrower, ensure the owner signs the REM (or an SPA with explicit mortgage authority).
Marital status: If owner is married and property is conjugal/community, get spousal consent.
Special capacity: If owner is a corporation, secure board resolutions and secretary’s certificate; if an estate/ward, secure court approval.
Property due diligence: Tax declarations, tax clearances, updated realty taxes, zoning, improvements, occupancy, adverse claims.
Register promptly: Perfect priority by immediate RD registration; pay DST and fees.
Default & foreclosure protocol: Ensure contractual notices and statutory Act 3135 steps are strictly followed.

B. For Borrowers Using Someone Else’s Titled Property

Get the owner’s informed consent; agree in writing on reimbursement, indemnity, and what happens upon default.
Avoid personal surety if you intend the owner’s exposure to be limited to the property. If you sign as co-maker/surety, you risk personal deficiency liability.
Pay on time. If default looms, explore restructuring before foreclosure triggers.

C. For Owners Mortgaging to Secure Another’s Loan

Limit liability in the loan/mortgage documents to the property only, unless you wish to be personally liable.
Monitor the loan: Demand copies of statements, demands, and default notices.
Cure or redeem strategically: Paying the creditor gives you subrogation rights against the borrower.
Keep originals: Safeguard your owner’s duplicate title and stamped/annotated mortgage.

X. Consequences When Things Go Wrong

Mortgage signed by borrower (non-owner) only: Mortgage is void; lender holds only an unsecured claim against borrower (unless other security exists).
SPA defects: If the agent lacked a valid SPA to mortgage, the owner is not bound; the REM is void as to the owner’s property.
No spousal consent on conjugal/community property: Mortgage is void absent proper consent or court authority.
Defective foreclosure (notice/publication errors): Foreclosure can be annulled; redemption/possession issues may arise.
Forgery: Absolutely void; RD annotation does not validate the mortgage.

XI. Frequently Asked Practical Questions

1) Can a parent mortgage their property to secure their child’s business loan? Yes, if the parent (titled owner) signs the REM (or SPA). Unless the parent also signs as surety/solidary debtor, their liability is typically limited to the mortgaged property.

2) If the borrower pays off the loan, how is the mortgage removed? The lender executes a Release/Cancellation of Real Estate Mortgage; submit for RD annotation to lift the encumbrance from the title.

3) May a co-owner mortgage the entire property? No. A co-owner can mortgage only his/her undivided share; it binds the share after partition, not the entire property.

4) Is a one-year right of redemption always available? No. The one-year period generally applies to extrajudicial foreclosure under Act 3135. Judicial foreclosure gives only equity of redemption before sale confirmation.

5) After foreclosure, can the bank still sue the owner for any deficiency? Only if the owner also undertook personal liability (e.g., as surety/co-maker). A pure third-party mortgagor, who did not personally assume the debt, is generally not liable for a deficiency.

XII. Drafting Tips (to reduce disputes)

State the parties precisely: identify the Borrower and Owner/Mortgagor distinctly.
Limitations clause: “Mortgagor’s liability shall be limited to the mortgaged property; no personal liability unless expressly assumed.”
Notice covenants: require the creditor to copy the owner on all demands and default notices.
Insurance and taxes: allocate who maintains fire/earthquake insurance and pays realty taxes; assign proceeds to the mortgagee.
Cross-default and drag-along: use carefully; ensure the owner understands when other obligations could trigger foreclosure.
Dispute venue and governing law: stipulate Philippine law and a clear venue; ensure consumer protection rules (if applicable) are observed.

XIII. Bottom Line

A mortgage is valid only if granted by the titled owner (or a duly authorized representative).
A third-party mortgage—owner’s property securing another’s loan—is lawful and common.
The borrower may owe the debt; the owner gives the security. Their rights and liabilities differ: the owner’s exposure is typically in rem unless the owner also personally guarantees the debt.
Registration and proper foreclosure formalities are decisive for enforceability and priority.
Careful documentation (authority, spousal consent, court approvals where needed) and strict compliance with foreclosure statutes are the best safeguards for all parties.

This write-up is for general information. For a specific transaction or dispute, consult counsel with your documents and title on hand.