Understanding Mortgages

• A mortgage is a temporary, conditional pledge of property to a creditor that acts as a security for performing an obligation or repaying a debt.
• It is also a contract that specifies the terms.
• Further, it is the claim of a mortgagee on mortgaged property.
• To mortgage means to pledge or convey property through a mortgage.
• It also means to subject something to a claim or risk, like pledging against a doubtful outcome.

Basic Mortgage Concepts

• Under Anglo-American property law, a mortgage occurs when an owner pledges their right to the property as security or collateral for a loan.
• A mortgage is an encumbrance (limitation) on the right to the property, similar to an easement.
• Because most mortgages are a condition for new loan money, the word "mortgage" generally means a loan secured by real property.
• Mortgages involve an interest rate and amortize over time, often 30 years.
• Real property is commonly secured with a mortgage, with the interest rate reflecting the lender's risk.
• Mortgage lending is the primary way private ownership of residential and commercial property is financed in many countries.
• While specific terminology may vary across countries, the basic components are generally similar.

Simple Mortgage

• The mortgagor undertakes personal liability for repayment.
• The possession of mortgaged property is not delivered.
• If the mortgagor defaults on payment, the mortgagee can have the mortgaged property sold.
• There is no foreclosure of the mortgaged property.
• The power to sell is only obtained on a decree for sale.
• The mortgage must be effected by a registered deed, even if the consideration is below Rs. 100/-.

Foreclosure

• Foreclosure is the legal process of terminating an owner's right to a property due to default.
• It typically involves a forced sale of the property at a public auction.
• The proceeds from the forced sale are used to pay the mortgage debt.

Mortgage by Conditional Sale

• The mortgagor ostensibly sells the mortgaged property.
• The sale becomes absolute if payment is defaulted by a date, or the sale becomes void if payment happens by a date, with the property retransferred.
• The mortgagee's remedy is foreclosure, not sale.
• The mortgage must be via registered deed if the consideration is Rs. 100/- or more.
• Registration is optional if the consideration is less than Rs. 100/-, but delivery of possession becomes necessary.
• The transaction must be embodied in a single deed.

Usufructuary Mortgage

• Possession of the mortgaged property is given to the mortgagee.
• The mortgagee retains possession until full repayment.
• Profit from the property is used by the mortgagee to reduce the advance.
• The property gets returned when the amount due is paid or discharged by rent and profits received.
• There is no remedy by sale or foreclosure.
• The mortgage must be effected by a registered deed if the consideration is Rs. 100/- or more.
• If the consideration is less than Rs. 100/-, registration is optional, but delivery is essential.

English Mortgage

• The mortgaged property is transferred absolutely from the mortgagor to the mortgagee.
• There is a personal covenant to repay on a certain date.
• There is a stipulation for retransfer if the loan is repaid.
• The mortgagee's remedy is sale, not foreclosure.
• The power of sale out of court is conferred on certain persons in specific circumstances (see Section 69).

Mortgage by Deposit of Title Deeds

• The mortgage type is created only in Kolkata, Chennai, Mumbai, and specified towns via state government notification in the official gazette.
• It is created by delivering material title deeds for the mortgaged property to the mortgagee with no property possession delivery.
• It is solely for securing a past debt or advance or to cover future advances.
• No registration is necessary, even with a written record of the deposit.
• The remedy is by sale, not foreclosure.
• All provisions of a normal mortgage also apply to an equitable mortgage.

Anomalous Mortgage

• A mortgage that does not fall under any of the 5 defined categories.
• It may be a combination of two or more types of mortgages.
• The remedy to use is sale or foreclosure, depending on the deed's terms.
• If the mortgage consideration is Rs. 100/- or more, the deed must be registered. If below Rs. 100/-, delivery of possession is vital, with registration optional.