Different Types of Mortgages Under the Transfer of Property Law

Mortgages are a significant component of real estate transactions, and the Transfer of Property Act goes into great detail about them. People can obtain loans by using their real estate as security through a mortgage.However, not all mortgages are made equal; there may be variations in terms of obligations, rights, and legal consequences. Several different types of mortgages are defined by the Transfer of Property Act.

Secured By the Transfer of Property Act

A mortgage is a legal agreement whereby a portion of a specific real estate is pledged as security for the repayment of a debt, whether it be one that is current or one that may arise in the future. The individual who gets the property and serves as the loan lender is referred to as the mortgagee, while the person who transfers the property is known as the mortgagor.

What is referred to as “mortgage money” is the entire amount borrowed, interest included. Typically, a mortgage deed is utilized to formally document the property transfer. To sum up, a mortgage is a mechanism for people to use their property as collateral to obtain a loan with explicit terms and obligations for all parties.

Categories of Mortgages Under the Transfer of Property Act

Easy Loan

The type of mortgage that is covered under Section 58(b) is known as a simple mortgage. In a straightforward mortgage, the mortgagor guarantees that they will personally repay the loan amount rather than giving the mortgagee ownership of the property. Furthermore, in the case that the mortgagor is unable to repay the loan, they provide the mortgagee permission to sell the property and use the proceeds to pay off the debt.

Basic but necessary components of mortgage are:

  • The mortgagor will repay the loan on an individual basis.
  • The property is not given to the mortgagee.
  • The mortgagor assigns the right to sell the property as security for the loan in the event that they are unable to make payments.

An essential part of a basic mortgage is the mortgagor’s personal obligation to repay the amount. There may be a clear responsibility upon loan approval, or one that is implied by the terms of the contract. In certain circumstances, such as a usufructuary mortgage, the terms of the mortgage transaction, however, may change this obligation.

The remaining proceeds are given to the mortgagor.

The mortgagor still owns the property in a conventional mortgage. The security afforded by the property itself to the mortgagee is unaffected by its income or profits. According to Section 68, a straightforward mortgagee seeking to uphold their security cannot obtain a possession decree. Alternatively, it would convert the simple mortgagee into a possessory mortgagee.The mortgagee has the right to sell the property in the event that the mortgagor defaults on the loan. To prevent this power of sale, the court must intervene.This suggests that the mortgagee needs a court order in order to complete the transaction. When the property is sold through the court system, the mortgagee gets the advance amount plus interest, and the mortgagor gets the remaining proceeds.

Used as Stridhan’s Collateral Security

In the case of Mathai Mathai v. Joseph Mary, a specific piece of property was used as collateral security for stridhan, and the mortgagor was responsible for paying interest on the loan repayment. However, the mortgage deed had no provision about the transfer of possession. As a result, the court determined that this particular document had to be classified as a simple mortgage.In the Kishan Lai v. Ganga Ram case, the court maintained the interpretation of Section 58(b) of the Transfer of Property Act 1882. The terms “right to cause the property to be sold” imply that the mortgagee cannot utilize the power of sale arbitrarily, the court explained. Instead, the selling process needs the involvement of the court in order to move further.

Mortgage for Conditional Sales

Section 58(c) provides the definition of a mortgage by conditional sale. A condition associated with this type of mortgage is the apparent sale of the property by the mortgagor to the mortgagee. If the mortgage funds are not paid off by a certain date, the transaction is considered final; if the payment is made, the buyer has the option to return the property to the seller, or the agreement may be nullified. This requirement needs to be included in the same document that affects the transaction.Muslims developed the mortgage by conditional sale to overcome their Islamic prohibition on loan interest collection. With this type of mortgage, they were still able to receive the principal and interest while maintaining their moral integrity.

Mortgage on Usufruct Basis

Under Section 58(d) of the statute, a usufructuary mortgage is defined. A usufructuary mortgage involves the mortgagor giving the mortgagee possession of the property either voluntarily or via their own actions.Until the mortgage total is paid off, the mortgagee is allowed to keep possession of the property and to keep the rent and profits from it. The mortgagee may use all or part of these rentals and earnings in lieu of interest or mortgage payments.

Change of Ownership

The mortgagor transfers ownership of the property to the mortgagee as security for the mortgage money. The mortgagee remains the legal owner of the property until the loan is paid off. Rather than at the time the mortgage deed is executed, the actual transfer of possession may be agreed upon by the mortgagor through an express or implied duty.

Earnings and Accommodation

The mortgagee is entitled to the rents and profits generated by the mortgaged property until the mortgage debt is paid in full. The distribution of profits and rents is governed by the terms of the mortgage deed. The mortgagee may substitute profits and rents for principle, interest, or both. The specific terms will determine when the mortgagor is able to reclaim the property.

No Personal Liability of the Mortgagor

In a usufructuary mortgage, the mortgagor is not held personally responsible for debt repayment. The mortgagee is required to use the rentals and earnings from the property to settle the mortgage obligation. The mortgage can last for as long as you choose, but the full repayment of the obligation is unpredictable.

The Rights of the Mortgagee

If the mortgagor fails to deliver the property, the mortgagee has the option to sue to recover possession of the asset and the advance payment. Nevertheless, if the mortgagee has already been given possession, their only choice is to hold onto the property until the debt is settled. The usufructuary mortgagee has no power of sale or foreclosure. The ability to use earnings and rental income to pay off their mortgage is one advantage for the mortgagee.

Rights of Usufructuary Mortgagors

Under Section 62, a usufructuary mortgagor may under certain circumstances be able to take back ownership of the property from the mortgagee. These circumstances include when the mortgage amount is paid, when the mortgage payment terms have elapsed, and when the mortgagee was permitted to deduct the mortgage payment from their profits and rentals. The mortgagor either pays the money to the mortgagee or deposits it in court. The mortgagee in Prabhakaran v. M Azhagiri Pillai was granted an interest in the mortgagor’s property, which allowed the mortgagee to retain possession and receive rent and profits until the debt was settled in full. The court states that with this arrangement, the mortgagor in a usufructuary mortgage is not personally accountable for anything.

The rights of the mortgage

In an English mortgage, the mortgagee has the right of possession even in the absence of express permission to enter. Until the entire amount is settled, the mortgagee may continue to be the legal owner of the property. If the mortgagee owns the property, the earnings from its sale will be used to settle the mortgagee’s outstanding obligation.For example, if A, the buyer, uses a sale deed to buy the property from B, the mortgagor, and B defaults on the payment, then A only needs to register the sale deed since they are now the sole owners of the property.

The Deposit for Title-Deed

Physical delivery of the documents is not necessary; constructive delivery suffices. A lawful equitable mortgage does not require the deposit of every title document; rather, the deeds presented must be genuine, relevant to the property, and offer substantial proof of ownership. Let’s imagine that a title deed is missing from the deposited papers and that other documents verify the person’s ownership of the property but are not deposited. Consequently, no equitable mortgage is created.

The intention is to create security.

The concept underlying the deal is that the title documents will act as collateral for the borrowed funds (debt). Transferring title deeds from one person to another does not establish a mortgage. The condition for the deeds to serve as security for the debt must be satisfied at delivery.

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