A mortgage loan is helpful for property buyers to raise funds to purchase a real estate property. On the other hand, it can also be used by existing property owners to raise funds for any purpose, while putting a lien on the property being mortgaged. There are 6 types of mortgages which are mentioned as below:
The characteristics of a simple mortgage are as follows:
- The borrowers are expected to personally to repay the loan.
- The mortgagee holds the right to sell the specified property if the borrower fails to repay the loan.
- In case of default by the borrower, the possession of the property is not delivered to the mortgagee. The sale of the property must be through the intervention of the court.
Mortgage by Conditional Sale:
Mortgage by conditional sale is the one in which the mortgagor ostensibly sells the mortgaged property on the condition that
- On default of payment of the loan on a certain date, the sale shall become absolute, or
- On the payment being made, the sale shall become void, or
- On the payment being made, the buyer shall transfer the property to the seller.
A usufructuary mortgage is one where the borrowers agree to deliver the possession of the mortgaged property to the mortgagees and authorizes them to
- Retain such possession until payment of the loan,
- Receive the whole or any part of the rents and profits from the property,
- To utilize such rents or profits; (i) in lieu of interest, or (ii) in payment of the principal amount, or (iii) partly in lieu of interest and partly in lieu of the principal amount.
- In case of English Mortgage, the mortgagor commits to repaying the mortgage money on a certain day.
- The mortgaged property is transferred to the mortgagee absolutely. The mortgagee is entitled to take immediate possession of the property.
- Under certain circumstances, the mortgagee may sell the mortgaged property without the intervention of the court.
- However, the transfer is subject to the condition that the mortgagee will re-transfer the property to the mortgagor, once the payment of the mortgage money is made.
Mortgage by deposit of title deeds
It is also known as an Equitable Mortgage and is most popular with the banks. According to Section 58 (f) of Transfer of Property Act, 1882, the essential requisites of such mortgage are:
- A debt should be there
- Deposit of the title deed with the loan provider
- The deposit is with the intention that the said title deed shall be security for the debt.
A mortgage loan other than any of the mortgages explained so far is called an anomalous mortgage. An anomalous mortgage is often formed by the combination of two or more types of mortgages explained above.
Therefore, an anomalous mortgage may take various forms depending upon custom, local usage, or contract.