Property Mortgage Laws in India
Property Mortgage Laws in India
The Transfer of Property Act, 1882 deals with the mortgage of immovable property in India. The mortgage is the transfer of an interest in immovable property for the purpose of securing a loan or the performance of an engagement. Hence, though mortgage does not transfer the property to a third-party, it creates an interest in the immovable property. In this article, we look at some of the major laws and regulations concerning the property mortgage in India.
Transfer of Property Act
The Transfer of Property Act deals with the mortgage of immovable property in India. A property mortgage is a transfer of an interest in a specific immovable property for securing the payment of money advanced in the form of a loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.
Mortgagor – Mortgagee
Mortgagor: In a property mortgage transaction, the mortgagor is the person who borrows the money in lieu of creating a mortgage on the property, as an assurance to pay the debt.
Mortgagee: Mortgagee in a mortgage transaction is the person lending money. Typically a bank or financial institution.
Types of Mortgage in India
The simple mortgage is when a mortgagor binds to pay the mortgage money as per loan documents or gives the mortgagee, a right to sell the property and apply proceeds towards the loan of the mortgagor. In a simple mortgage, the possession of the property is not deliverable to the mortgagee.
Mortgage by Conditional Sale
A mortgage by conditional sale is when the mortgagor sells the mortgaged property to the mortgagee with a condition, with the sale becoming absolute in case of a payment default. In case of payment of mortgage then the same property is void as per terms.
The usufructuary mortgage is when a mortgagor delivers possession of a property to the mortgagee and authorizes the mortgagee to hold possession of the property until payment of the debt. Usually, rent or profits from the property while in possession of the mortgagee is applied in whole or in part towards the debt.
An English mortgage is when a mortgagor binds himself to repay the loan on a certain date and transfer the property absolutely to the mortgagee, subject to the provision that the mortgagee will re-transfer the property back to the mortgagee on payment of the loan amount as agreed.
Mortgage by Deposit of Title-Deeds
Mortgage by deposit of title deeds is when the mortgagor delivers to the mortgagee, title to immovable property, with an intent to create security until the payment of the debt.
Any mortgage which is not a simple mortgage or mortgage by conditional sale or usufructuary mortgage or English mortgage or a mortgage by deposit of title deeds can be an anomalous mortgage.
Validity of Property Mortgage
Any mortgage other than a mortgage by deposit of title deeds is valid only if the mortgage is entered by way of a registered instrument that is signed by the mortgagor and attested by at least two witnesses.
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