What happens if a property is totally destroyed while under mortgage?

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Ali Faizan Syed · Accepted Answer

If a mortgaged property is totally destroyed or becomes defective, the mortgage is not extinguished. Instead, the Mortgage is transferred to any substitute property or insurance payout that replaces the original asset. The Mortgagee (the lender) maintains their right to enforce the debt against this substitute asset according to the original rank of the mortgage. This protection ensures that the creditor's security remains intact even if the physical property is lost.

What happens if a property is totally destroyed while under mortgage?

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Ali Faizan Syed