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Mortgaging property is a critical financial decision in which immovable property is pledged as collateral to secure a loan. This legal arrangement gives the mortgagee control of the property if the mortgagor fails to repay the loan. The mortgagor is still responsible for repayment, while the mortgagee has legal rights as defined in the mortgage deed.
This article aims to provide a comprehensive understanding of the various types of mortgage deeds accessible under Indian law. This article assists mortgagor and Mortgagee in making educated decisions while providing financial and legal protection for both sides.
A mortgage is a legal transfer of interest in specified immovable property from the mortgagor to the mortgagee as collateral for a loan. The Indian Transfer of Property Act, 1882, specifically Section 58, governs mortgages in India.
Key Terms:
Mortgagor: The individual who pledges the property.
Mortgagee: The mortgagee receives the security.
Mortgage Money: Loan amount plus interest.
Mortgage-deed: The legal document containing the agreement.
1.Transfer of interest: The mortgagor conveys a legal interest (not ownership) in the property to the mortgagee as security.
2.Two Parties: Every mortgage has two parties – the mortgagor and the mortgagee, both of whom have legally enforceable rights and obligations.
3.Repayment terms: Mortgages explicitly identify the loan amount, interest rate, and repayment period.
4.Right to Sell: Depending on the type, the mortgagee may have the power to sell the property if the debt is not returned.
5.Legal documents: The mortgage deed formalises the provisions and makes them legally enforceable.
6.Security: The mortgaged property provides the mortgagee with guarantee of repayment.
In a simple mortgage, the mortgagor retains possession of the property while promising to repay the amount. If the mortgagor defaults, the mortgagee may sell the property to recoup the debt, as specified in the mortgage-deed.
Key Features:
There is no transfer of possession.
Personal liability of the mortgagor.
If the mortgage is not paid, the mortgagee may sell the property throwing following a court process.
The legal title remains with the mortgagor.
This is governed by Section 58(c) of the Transfer of Property Act. The mortgagor sells the property with a condition – if the loan is not repaid by a specific date, the sale becomes final. If the mortgage is repaid, the transaction is null and void, and the mortgagor reclaims all rights.
Key Features:
Conditional transfer of ownership.
No transfer of possession unless a default occurs.
Sale validity is contingent on repayment.
The written deed must contain specific conditions.
In this case, possession of the property is granted to the mortgagee, who may utilise it or collect rent to repay the loan. When the loan is paid off, the mortgagor receives possession of the property.
Key Features:
Transfer of possession, not ownership.
The right to use and lease the property.
Property income is used to repay debts.
The mortgagor has no personal liability.
Property is returned following repayment.
In an English mortgage, ownership of the property is transferred to the mortgagee, with a fixed payback date. On repayment, the property must be returned to the mortgagor.
Key Features:
Complete transfer of ownership.
A fixed repayment date.
A binding duty to repay.
Property is returned upon repayment.
This is a simple kind of mortgage in which the mortgagor deposits the property’s title documents with the mortgagee as security, but does not relinquish possession. Popular in cities such as Mumbai, Kolkata, and Chennai.
Key Features:
Title deeds act as collateral.
No physical transfer or sale.
Quick and cost-effective.
Applies only to notified cities.
Legally enforceable if the debt is not paid.
When a mortgage does not fulfil the conventional standards, it is referred to as an Anomalous Mortgage. These might be custom agreements between the mortgagor and mortgagee that incorporate elements from several categories.
Key Features:
Unique or hybrid arrangements.
Flexible repayment and usage terms.
Must be legally compliant.
This may include possession or sale rights.
Agreements take precedence.
In a simple mortgage, the mortgagor retains possession of the property while promising to repay the amount. If the mortgagor defaults, the mortgagee may sell the property to recoup the debt, as specified in the mortgage-deed.
Key Features:
There is no transfer of possession.
Personal liability of the mortgagor.
If the mortgage is not paid, the mortgagee may sell the property throwing following a court process.
The legal title remains with the mortgagor.
This is governed by Section 58(c) of the Transfer of Property Act. The mortgagor sells the property with a condition – if the loan is not repaid by a specific date, the sale becomes final. If the mortgage is repaid, the transaction is null and void, and the mortgagor reclaims all rights.
Key Features:
Conditional transfer of ownership.
No transfer of possession unless a default occurs.
Sale validity is contingent on repayment.
The written deed must contain specific conditions.
In this case, possession of the property is granted to the mortgagee, who may utilise it or collect rent to repay the loan. When the loan is paid off, the mortgagor receives possession of the property.
Key Features:
Transfer of possession, not ownership.
The right to use and lease the property.
Property income is used to repay debts.
The mortgagor has no personal liability.
Property is returned following repayment.
In an English mortgage, ownership of the property is transferred to the mortgagee, with a fixed payback date. On repayment, the property must be returned to the mortgagor.
Key Features:
Complete transfer of ownership.
A fixed repayment date.
A binding duty to repay.
Property is returned upon repayment.
This is a simple kind of mortgage in which the mortgagor deposits the property’s title documents with the mortgagee as security, but does not relinquish possession. Popular in cities such as Mumbai, Kolkata, and Chennai.
Key Features:
Title deeds act as collateral.
No physical transfer or sale.
Quick and cost-effective.
Applies only to notified cities.
Legally enforceable if the debt is not paid.
When a mortgage does not fulfil the conventional standards, it is referred to as an Anomalous Mortgage. These might be custom agreements between the mortgagor and mortgagee that incorporate elements from several categories.
Key Features:
Unique or hybrid arrangements.
Flexible repayment and usage terms.
Must be legally compliant.
This may include possession or sale rights.
Agreements take precedence.
Mortgages are important legal tools that balance the mortgagor’s need for capital against the mortgagee’s requirement for security. Each mortgage kind has unique legal requirements governing possession, repayment, and rights, making the decision a legal one with long-term ramifications.
This article is authorised by Adv. Abdul Mulla, emphasises the need of recognising these variations. With expertise gained through platforms such as www.asmlegalservices and www.lifeandlaw.in, he emphasises the importance of professional legal counsel in preventing future problems and protecting both parties’ interests.
Adv. Abdul Mulla (Mob. No. 937 007 2022) is a seasoned legal professional with over 18 years of experience in advocacy, specializing in diverse areas of law, including Real Estate and Property Law, Matrimonial and Divorce Matters, Litigation and Dispute Resolution, and Will and Succession Planning. read more….
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