1.Definitions.
As used in this section, unless the context otherwise indicates, the following terms have the following meanings.
2.Authorization.
An interest in real property that may be conveyed as security for a debt or other obligation may be mortgaged to secure future advances up to a total amount outstanding from time to time as stated in the mortgage instrument. Future advances secured by such a mortgage instrument have priority over persons who, subsequent to the recording of the mortgage, acquire any rights in or liens upon the mortgaged real estate, in accordance with subsection 5, only if the mortgage instrument states that it secures future advances and specifies the total amount of debts or obligations, including future advances, that it may secure from time to time.
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1.
Definitions.
As used in this section, unless the context otherwise indicates, the following terms have the following meanings.
2.
Authorization.
An interest in real property that may be conveyed as security for a debt or other obligation may be mortgaged to secure future advances up to a total amount outstanding from time to time as stated in the mortgage instrument. Future advances secured by such a mortgage instrument have priority over persons who, subsequent to the recording of the mortgage, acquire any rights in or liens upon the mortgaged real estate, in accordance with subsection 5, only if the mortgage instrument states that it secures future advances and specifies the total amount of debts or obligations, including future advances, that it may secure from time to time.
3.
Applicability limited.
This section may not be construed to affect or otherwise change existing law that allows mortgages to secure existing debts or obligations, debts or obligations created simultaneously with the execution of the mortgage, contingent obligations, protective advances, accrued interest and other debts or obligations that may be secured by a mortgage under existing law, but if such a mortgage states no or nominal consideration and does not expressly provide for future advances, the mortgage does not afford security for any advances made subsequent to the execution of the mortgage, other than protective advances.
4.
Validity; requirements.
A mortgage securing future advances remains valid and retains its priority even if no funds have been advanced or all future advances have been repaid as long as an agreement regarding future advances remains in effect. Upon termination of the agreement regarding future advances and repayment of all amounts secured by the mortgage, the mortgage must be discharged.
5.
Priority.
Future advances secured by a mortgage have priority over the rights of all persons who, subsequent to the recording of such a mortgage, acquire any rights in or liens upon the mortgaged real estate to the extent that the aggregate amount of all debts or obligations secured at any one time, including future advances but excluding protective advances, does not exceed the total amount stated in the mortgage, subject to the following.
6.
Amount of future advances in excess of mortgage amount.
Until repaid, the amount by which a future advance causes the aggregate amount of all debts or obligations secured at any one time, exclusive of protective advances, to exceed the total amount stated in the mortgage does not have priority over persons who, subsequent to the recording of the mortgage, acquire any rights in or liens upon the mortgaged real estate. The mortgagee may credit repayments first to amounts exceeding the total amount of secured debts or obligations stated in the mortgage.
7.
Application.
This section applies to mortgages that are recorded on or after January 1, 1994.