By

P.Ravichandran

Assistant Professor

Department of Civil Engineering

Kongu Engineering College

Perundurai-638060

Mortgage

• A legal agreement by which a bank, building

society, etc. lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.

• A mortgage is a security interest in real

property held by a lender as a security for a debt, usually a loan of money.

• Wex Law Dictionary: A mortgage involves the transfer of an interest in land as security for a loan or other obligation.

A legal document by which the owner (i.e., the buyer) transfers to the lender an interest in real estate to secure there payment of a debt, evidenced by a mortgage note.

When the debt is repaid, the mortgage is discharged, and a satisfaction of mortgage is recorded with the register or recorder of deeds in the county where the mortgage was recorded.

Because most people cannot afford to buy real estate with cash, nearly every reale state transaction involves a mortgage

• The party who borrows the money and gives the mortgage (the debtor)

is the mortgagor; the party who pays the money and receives the mortgage (the lender) is the mortgagee.

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Under early English and U.S. law, the mortgage was treated as a complete transfer of title from the borrower to the lender.

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The lender was entitled not only to payments of interest on the debt but also to the rents and profits of the real estate.

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This meant that as far as the borrower was concerned, the real estate was of no value, that is, "dead," until the debt was paid in full—hence the Norman-English name "mort" (dead),"gage" (pledge).

Transfer of Property Act, 1882 SECTION- 58 (a)

A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.

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The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed.

Types of Mortgages

1. Simple Mortgage
2. Mortgage by Conditional Sale
3. Usfructuary Mortgage
4. English Mortgage
5. Mortgage by deposit of title of deeds
6. Anomalous mortgage

Simple Mortgage

• In a Simple mortgage, the possession of the mortgaged property is not transferred from mortgagor to the mortgagee.

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If the mortgagor fails to repay the loan, the mortgagee has the right to sell the property and recover the loan from the sale amount.

• (b) Simple mortgage.—Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee.

Mortgage by Conditional Sale

• Under such Mortgage, the mortgagor apparently sells the property to the mortgagee on certain conditions -
1. On failure to repay the mortgage money before a certain date the sale shall become absolute, or
2. On condition that on such repayment of mortgage money the sale shall become invalid, or
3. On condition that on such repayment the mortgagee shall retransfer the property.

In such case, the mortgagee is a "mortgagee by conditional sale".

Usufructuary Mortgage

• In a usufructuary Mortgage, the possession of the mortgaged property is transferred to the mortgagee. The mortgagee receives the income from the property (rent, profit, interest, etc) until the repayment of the loan. The title deeds remain with the owner.
• (d) Usufructuary mortgage.—Where the mortgagor delivers possession 1[or expressly or by implication binds himself to deliver possession] of the mortgaged property to the mortgagee, and authorises him to retain such possession until payment of the mortgage-money, and to receive the rents and profits accruing from the property 2[or any part of such rents and profits and to appropriate the same] in lieu of interest, or in payment of the mortgage-money, or partly in lieu of interest 3[or] partly in payment of the mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary mortgagee.

English Mortgage

• In an English Mortgage -

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• The mortgagor binds himself to repay the borrowed money on a certain date.
• The mortgagor transfers the property absolutely to the mortgagee. 3.But such transfer is subject to the condition that the mortgagee will retransfer the property on repayment before the agreed date.
2. (e) English mortgage.—Where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage. 4[(f) Mortgage by deposit of title- deeds.—Where a person in any of the following towns, namely, the towns of Calcutta, Madras, 5[and Bombay], 6[* * *] and in any other town7 which the 8[State Government concerned] may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds.

Mortgage by deposit of title of deeds

• In such mortgage, the mortgagor delivers the title document of the property to the mortgagee with an intention to create a security thereon. Such mortgage is valid in towns of Kolkata, Mumbai and any other town as the State Government may notify by publication in Official Gazette.

Anomalous mortgage

Anomalous mortgage is a combination of different types of mortgages.

• (g) Anomalous mortgage.—A mortgage which is not a simple mortgage, a mortgage by conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds within the meaning of this section is called an anomalous mortgage.]

Additional type

• Reverse Mortgage - reverse mortgage loan is a loan where the lender pays the monthly installments to you instead of you making any payments to the lender.
• Hence the name reverse mortgage, as the payment stream is reversed. A Reverse mortgage enables senior citizens to convert their home equity into tax-free income. Reverse mortgages enable eligible homeowners to access the money they have built up as equity in their homes. They are primarily designed to
• strengthen seniors’ personal and financial independence by providing funds without a monthly payment burden during their lifetime in their home.