A mortgage is an integral aspect of a home loan. Mortgaging means pledging your personal property with a lender to gain access to funds. The property remains mortgaged until the loan amount is repaid.
As the borrower, you need to be aware of the difference between a registered mortgage and an equitable mortgage. For starters, the stamp duty expenses in both processes vary. Even the post due payment
procedure are different in both cases as explained ahead.
You need to know what equitable mortgage is to understand the loan procedure. In an equitable mortgage, you, as the borrower, transfer the title deed of the property to the lender. You accept this financing on the terms that the property which has been mortgaged will remain as a security against the loan.
This type of mortgage does not involve any formal agreement; however, you verbally confirm that the lender has a charge on the property. Hence, you will need to submit the title deed of the property as security against the loan. The charges and stamp duty in this mortgage type are low as compared to a registered mortgage. In addition, the procedure in an equitable mortgage is simple and hassle-free.
The process is slightly different in the case of a registered mortgage. Here, you will have to create a charge over the property through a written process, which is an evidence of transfer of interest. Hence, this mortgage is also known as a ‘Deed of Trust’. This form of mortgage needs to meet all the statutory requirements to create a charge.
Once you pay the entire loan amount as per the terms and conditions, the lender returns the property title to you. You will have to sign the agreement with the lender and register it with the Sub-Registrar. In case you fail to repay the loan, the lender will have the legal right to gain possession of the property. The procedure in this type of mortgage is complicated in comparison to an equitable mortgage.
Difference of post due payment procedures
Post due payment procedure is carried out after the repayment of the entire loan and interest amount. There is a significant difference in the post due payment procedure in both types of mortgages and it is important to understand the difference.
In case of an equitable mortgage:
The lender will hand over the property documents to you and issue a ‘No Dues Certificate’. Once the certificate is issued, it means that there is no outstanding amount on the loan.
In case of a registered mortgage:
The lender has to execute a ‘Memorandum of Release of Mortgage’ and you will have to register it with the Sub-Registrar’s office. This will mean that your loan is repaid.
You will have to follow the above-mentioned procedure even in the case of prepayment of home loan. The loan will only be considered as closed when you follow the process and receive the certificate from your lender.
Many people are unaware of the importance of the post due payment procedure, and therefore, do not take the right steps after the loan has been repaid. Bajaj Finserv Home Loan available on Finserv Markets has a hassle-free application procedure. Their online home loan application process is quite simple and requires minimal paperwork. The loan amount will get disbursed in your account post verification. Home loans at Finserv MARKETS provide complete transparency with no hidden charges, no dubious policies.
It is advisable to gain an understanding of the types of mortgage and the steps to close the outstanding loan before signing on the loan documents. You must also gain thorough knowledge about the prepayment charges.
You also need to have established terms with the lender regarding the post due payment procedure. This is to ensure that the loan is closed in a legal manner and that the lender returns the property documents to you. Read more on difference between registered mortgage vs equitable mortgage only at Finserv MARKETS
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