The transfer of Property Act, 1882 deals with the mortgage of immovable property in India. The mortgage is the transfer of a share of the immovable property to secure a loan or to the performance of an engagement. Therefore, though mortgage does not transfer the property to third parties, it creates an interest in immovable property. In this article, we look at some essential laws and regulations regarding the mortgage of property in India.
Transfer of property act
The Property Transfer Act deals with the mortgage of immovable property in India. A mortgage is defined in the act as a transfer of an interest in a particular land to secure payment of money advanced or to be advanced through a loan, an existing or future liability, or performance of an engagement which may give rise to a pecuniary liability
Mortgagor – Mortgagee
Mortgagor: In a property transaction, the mortgagor is the person who borrows money instead 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 mortgages in India
A simple mortgage is when a mortgage is required to pay the mortgage money according to the loan documents or gives the mortgagee, the right to sell the land and apply proceeds towards the mortgagor’s loan. In a simple mortgage, ownership title is not transferred to the mortgagee.
Mortgage through the conditional sale
A mortgage by conditional sale is when the mortgagee sells the mortgaged property to the mortgagee with a condition, with the sale becoming absolute in case of payment default. If payment is made to the mortgagee in accordance with the terms, then the same of the property is held to be void.
The usufructuary mortgage is when a mortgagor delivers the possession of a property to the mortgagee and authorises the mortgagee to hold possession of the property until the payment is debt. In general, the rent or profit from the property during the possession of the mortgagee in whole or in part towards the debt.
An English mortgage is when a mortgage agrees to repay the loan at a specific date and transfer the property entirely to the mortgagee, provided the mortgagee agrees to transfer the property back to the mortgagee upon payment of the loan amount as agreed.
Mortgage through the deposit of title-deeds
Mortgage through the deposit of title deeds is when the mortgagor delivers to the mortgagee, title to immovable property, with an intent to create security until debt payment.
Any mortgage other than a simple mortgage or mortgage through a conditional sale or usufructuary mortgage or English mortgage or a mortgage through the deposit of title deeds is considered an abnormal mortgage.
The validity of the property mortgage
Any mortgage other than the mortgage by deposit of title deeds is only valid if the mortgage is registered through a registered instrument signed by the mortgagor and certified by at least two witnesses.