Mortgage loans are one of the most common forms of home finance. A mortgage loan is a transfer of interest in an immovable property to secure the repayment of the loan. The mortgage needs to be created in favour of the lender over the immovable property. According to the Transfer of Property Act, 1882 various types of mortgages are explained ahead.
What are the Rules Regarding Transfer of Property?
- The property in the goods is transferred to the buyer only after the goods are ascertained. The property in such goods passes on from the seller to the buyer at the time the parties intend it to pass.
- In the sale of specific goods, if an unconditional contract is in a deliverable state, the property in the goods is passed on to the buyer.
- The property in the goods does not get a pass until the seller has changed it to a deliverable state. When the sale of specific goods is in a deliverable state the seller has to weigh or measure the goods to determine the price.
Which Interest is Transferred Under a Simple Mortgage?
The mortgagor who has the possession of the overall interest of the property only hand over a part of the interest in favour of the mortgagee to secure a loan. Once the mortgage is completed, the interest of the mortgagor reduces to that proportion that has been mortgaged. The ownership of the mortgagee reduces temporarily until he makes good of the loan that he has availed. When the mortgagor transfers his property, the mortgagee has rights to recover what he has loaned to the mortgagor.
Types of mortgages
Discussed below are the different types of mortgages.
A simple mortgage for a home loan requires the mortgagor to bind himself for the repayment of the loan. Further, in order to secure the amount, the mortgagor needs to transfer a right to the lender to sell the immovable property if he fails to repay the home loan. The possession of the property will remain with the borrower and is not given to the lender.
Under this type of mortgage, the possession of an immovable property will be given to the lender and he will get profits and rents related to the principal and interest component of the loan. In this type, the mortgagor does not incur any personal liability. An unsufructuary mortgage has no fixed time limit and it is not prevalent in India.
In an English mortgage, the mortgagor is personally liable to repay the amount on a specific day and the property should be transferred to the lender. However, such a transfer comes with a provision that upon the repayment of the loan, the mortgagor will recover the money on the pre-decided day.
Mortgage by Conditional Sale
In this form of mortgage, the mortgagor sells the property on the condition that a default in payment of the money will make the sale absolute. Alternatively, there is a condition that once the payment is made, the sale shall be void and the buyer will transfer the property to the seller.
Mortgage by Deposit of Title Deeds
Popularly known as equitable mortgage, in this type, the deposit of the title deed of the property will be with the lender. This deposit will be with an intention that the title deed will be a security for the loan. You need to know what is an equitable mortgage, as it is quite prominent in India. This mortgage does not need a formal registration and it is at par with any legal mortgage.
Any mortgage that is not a simple mortgage, an usufructuary mortgage, English mortgage, mortgage by conditional sale or a mortgage by deposit of title deeds is known as an anomalous mortgage.
An understanding of different types of mortgage and the post due payment procedure is very important. In case of prepayment of home loan, you need to be aware of the loan closure procedure and get the property documents back from the lender. Depending on the type of mortgage, the loan closure procedure will be established.
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