When you purchase a home and go to online financial platforms like Finserv MARKETS to apply for a loan, the institution will keep all the original documents with them as security/guarantee and grant you the loan based on the paperwork you provide. Such loans are also known as mortgages. Normally two parties are involved when borrowing a loan – borrower and the lender. There are different forms of mortgages; the selection of mortgage generally depends on the borrower.
The most common arrangement is that the borrower takes money from the lender and pays back on a monthly basis. The lender keeps all the property related documents until the loan is paid off and this is called a simple mortgage.
Due to an unforeseen event, if the borrower fails to repay the loan the bank has certain rights on the property depending on the initial agreement they decide on. Learning how to reduce home loan EMI is an art but it is not very difficult.
What is Equitable Mortgage?
Equitable or simple home loan is the most common form of home loan. In this scenario, when you borrow money from a lender, the property documents stay with the lender. The tenure of the home loan is 15-20 years long and the papers come back to you only after the complete repayment of the loan. During equitable mortgage, you give ownership of your property to your bank until you repay the whole amount. In case you default the loan you also allow them to take over your property.
A Memorandum of deposit of title deeds is created from the borrower’s end. This memorandum is the record of all the documents submitted to the bank, this also states that the borrower has submitted all the home loan documents willingly and a stamp duty is paid. The charge paid towards stamp duty is a called the MODT. Depending on the state you live in, the charges from 0.1% to 0.2% of the home value. It is also mandatory to record the MOD (Memorandum of Deposit) with an organization called CERSAI (Central Registry of Securitization Asset Reconstruction and Security Interest).
What is Registered Mortgage?
A registered mortgage is that category of loan where the borrower willingly gives full right of the property to the bank in case of a loan default. In such a scenario, you as a borrower have allowed the bank to dispose the property in whichever manner they desire if you default the loan. This is a more complex form of loan and the bank has far more rights over the property as opposed to a simple mortgage.
Equitable Mortgage VS Registered Mortgage
There are different forms of mortgages such as equitable mortgage and registered mortgage. Before you make a loan application, it is important to understand the difference between Equitable Mortgage and Registered Mortgage.
In most cases, banks prefer simple loans but in certain cases, they may press for a registered agreement. Some basic difference between them are:
Equitable mortgages are not registered. This means a borrower must buy a stamp paper and fill the deposit of title on the MODT. The value of MODT (Memorandum of Deposit of Title Deed) is 0.1% or 0.2% of the home value and comes with a price.
In Registered Mortgages, a borrower must approach the sub registrar’s office and the cost of registration is 5% of the home value. It is expensive but if the banks insist, this is the only way.
In case of equitable mortgage if you fail to repay the loan, the bank takes over your property and auctions it off. In case of registered mortgage, the property is transferred to the bank and it can do whatever it wants to do with it.
With Finserv MARKETS, applying for a Bajaj Finserv Home Loan is easy, quick and completely hassle-free. What’s more? Your home loan comes with a plethora of features and benefits that you can avail right from the comfort of your home. So why wait? Head over to Finserv MARKETS and apply for a home loan with us, today!
Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and exclusive EMI store, all under one roof- anytime, anywhere!