What is Mortgage and Various Types of Mortgage!!!

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What is Mortgage and Various Types of Mortgage!!!

A mortgage is defined as a way to use one’s property as a guarantee in order to get money as a loan from someone. This property has to be real like a house, land, flat or building. If we define it in a technical manner then the mortgage is defined as the mode to secure the payment of money by transfer of an interest in the immovable property. And there are various types of Mortgage which we will see below.

There are two types of people in the mortgage the debtor and the creditor. The debtor is the one who owns the property and the creditor is the one who keeps the property as a guarantee and gives money as a credit to the debtor. The debtor has to pay money with interest in a specific period of time to the creditor. The creditor has the right to own the property if the debtor fails to return money in a specific period of time.

In other words, the mortgage is also termed as a loan. You might have heard of this term. Earlier rich people used to provide loans to small workers. In this way, they could earn money in the form of interest without much hard work. These days, people turn to the banks like ICICI Bank for any form of a loan. All the terms and conditions are decided beforehand and a contract is created to seal the deal for the loan.

 

 

What are 6 Various Types Of Mortgage in india?

 

1.  What is Simple Mortgage?

Simple Mortgage is actually one of the simplest types of mortgages. Here, the mortgagor will request money as a loan with delivering the complete possession of his or her property to the mortgagee.

Mortgagor will have to agree to the contract where the mortgagee will have the right over the property and can sell it if the mortgagor fails to repay the debt in the given period of time.

Also read: What are auto loans and types of auto loans?

However, the mortgagee needs the court’s intervention in this process. The mortgagee will have to obtain permission from the court to sell the property to recover the mortgage amount. This type of mortgage is called a simple mortgage.

 

2. Understanding Usufructuary Mortgage

Usufructuary is a special type of mortgage. Here, the mortgagor needs to deliver the possession of his or her property either implicitly or expressly to the mortgagee. The mortgagee is authorized to retain the possession of the property until the mortgagor returns the full amount with interest.

During this time period, the mortgagee will receive the rent or profit associated with the mortgaged property. The mortgagee will receive this amount as part of the loan amount that the mortgagor is responsible to pay.

For example, you own a flat that is given on rent and you are using it as a mortgage. So the mortgagee will own the property and receive the rent of this flat. The amount will be deducted from the loan amount.

 

3. Get to Know English Mortgage

In the case of an English Mortgage, the mortgagor will bind himself to pay the complete mortgage amount on a specific date. Along with binding himself for repay, the mortgagor has to transfer his or her real property to the mortgagee.

The transfer is made with a provision that once the payment is received mortgagee will again transfer the property to the owner.

For example, you want to mortgage a flat with an English mortgage policy. You will receive the money and you will transfer the ownership to the mortgagee until you repay the amount. Soon after the payment, you will become the owner of your flat again.

 

4. Meaning of Mortgage By Conditional Sale

Just as the name suggests there are conditions in the mortgage by conditional sale. The mortgagor will sell a property that he or she wants to mortgage with certain conditions. The sale of the property to mortgagee will be valid if the mortgagor fails to repay the amount.  If the mortgagor repays money then the sale will either become void or the mortgagee will re-transfer it to the mortgagor.

 

5. Getting Familiar with Mortgage By Deed Deposits

The mortgage by deed deposits is also termed as an equitable mortgage. Here, the mortgagor will deposit the title deed of his or her immovable property to the mortgagee. It is considered security until the loan is repaid.

Also read: What is the difference between Pledge, hypothecation and mortgage

There is no legal procedure involved to give charge of the property to the mortgagee. Also, it is not necessary that an official written memorandum is created for the deposit of title deed. There is a restriction on the towns that are allowed to use equitable mortgage in their area. Both parties must sign an agreement that the property is only kept as security and the loan will be repaid in a certain period of time.

 

6. Significance of Anomalous Mortgage

A mortgage that is not a Simple mortgage, an English mortgage, Equitable Mortgage, Mortgage by conditional sale and Mortgage by deed deposit is the Anomalous mortgage. This mortgage is not directly one of these mortgages but created by the combination of the above mortgages. So there is no single criterion that can define it. These could be combined in any form depending on their usage.

 

 

Conclusion

Mortgages are used by homebuyers by pledging their house to the mortgagee. They claim their possession over the house in case of default in repayment of the mortgage. This occurs in the case of a residential mortgage. In the case of business, people don’t want to invest a full amount so they use a mortgage to pay the amount and keep repaying the amount with interest while earning money through their business.

Also read: 7 Factors Need Consideration Before Sanctioning Banks Loan

The mortgages also vary on the basis of the interest rate. If the interest rate remains constant during the complete lifetime of loan it is called a fixed-rate mortgage. In the case of adjustable-rate mortgages, the initial rate of interest remains fixed but it varies according to the market’s updates.

Mortgages do come with a lot of variables based on the type of mortgagee you are planning to take a loan from. If you are planning to take any form of mortgage you must research for the present scenarios in the market. In the case of the high mortgage amount, it is advised to take the help of the expert. Although you will have to pay some amount for the expert’s help, it will prove to be the best decision with their expertise in the mortgage field.

If you like the information provided by us then do share your feedback through the comment section. Do share your insight on the various types of mortgage in the market.