Mortgage is a debt instrument or a legal agreement by which a bank lends money by securing title of the borrower's specific real estate property, at fixed or variable interest rates, and gives back the title to the borrower on successful payment of the debt amount. If the borrower fails to settle the debt amount, the lender can sell the property and gain back the debt amount by the sale of the property.
Under Section 58(a) of the Transfer of Property Act, 1882, mortgage’s definition stands as a specific immovable property’s transfer of ownership to secure payment of funds against it, extended as a mortgage loan in the form of credit.
Mortgage loans in India are available under 6 different mortgage types:
- Simple Mortgage
Here, the borrower simply mortgages the immovable asset personally to avail a loan. The lender has the right to sell mortgaged property in case of repayment failure.
- Usufructuary Mortgage
In this, the property’s possession is transferred to the lender who can receive rents or profits from it without creating any personal liability7 on the borrower.
- English Mortgage
It establishes personal liability on the borrower, and the mortgaged property is transferred to the lender on the condition that successful loan repayment will lead to recovery.
- Mortgage By Conditional Sale
Here, a mortgagor sells his/her property with terms that it becomes effective if he/she defaults in repayment but turns void on successful repayment.
- Mortgage By Title Deed Deposit
The borrower deposits the title deed of the property to be mortgaged with the lender against the loan to avail.
- Anomalous Mortgage
A mortgage that doesn’t come under any of the above mortgage types is an anomalous mortgage.