Simple Mortgage, Equitable Mortgage and Bank Loans
In the article Different Types of Mortgages and Bank Loans, we read that Section 58 of the Transfer of Property Act mentions six kinds of mortgages. Of these mortgages, banks generally prefer mortgage by deposit of title deeds (equitable mortgage) and simple mortgage over other types for securing a loan. Creation of charge by way of equitable mortgage is much easier compared to simple/registered mortgage. Hence simple mortgage is insisted only in exceptional cases.
What is meant by Simple/ Registered mortgage?
A simple mortgage is created through a registered deed and hence it is also called registered mortgage. The borrower has to incur such stamp duty and registration charges. Simple mortgage is preferred over equitable mortgages in exceptional cases such as :
a. where the original title deeds are not available OR
b. the party has already created a mortgage and a second mortgage has to be created in favour of the Bank.
The features of a simple /registered mortgage are:
a) Mortgagor is personally liable (personal obligation) to the mortgagee for the liabilities.
b) Mortgagee gets a right to cause sale of the mortgaged property. This right to be exercised through a court of law.
c) Ownership is not transferred and possession not given to mortgagee
What is meant by equitable mortgage (mortgage by deposit of title deeds)?
Equitable mortgage is the most preferred method among banks to create security interest (charge) over an immovable property because of the simple process. Delivery of original documents in a branch situated in a notified area, with an intention to create a mortgage is sufficient to create an equitable mortgage. There is no necessity to execute any document. However, due to separate rules passed by different states, various procedures are required to be complied with to have a valid equitable mortgage.
Following three conditions should be satisfied to create a valid equitable mortgage.
a) There should be a debt, existing or future.
b) Delivery of documents of title to immovable property to a creditor or his agent, at a notified centre.
c) Delivery of title deeds should be with an intention to create the mortgage.
Different Types of Mortgages-A Comparison
