MORTGAGE

MORTGAGE

            Mortgage is defined as  a conveyance of property, upon condition, as security for the payment of a debt or the performance of a duty, and to become void upon payment or performance according to the stipulated terms; also, the written instrument by which the conveyance is made or a  State of being pledged; as, lands given in mortgage or  to grant or convey, as property, for the security of a debt, or other engagement, upon a condition that if the debt or engagement shall be discharged according to the contract, the conveyance shall be void, otherwise to become absolute, subject, however, to the right of redemption or to pledge, either literally or figuratively; to make subject to a claim or obligation or a conditional conveyance of property as security for the repayment of a loan or put up as security or collateral or an agreement to give up an interest in something if you fail to perform some duty. In many cases, it means that you'll give up your home if you fail to repay your home loan as agreed. You can use mortgage as a verb, meaning "to pledge".

            So to say a mortgage is the pledging of a property to a lender as a security for a mortgage loan. While a mortgage in itself is not a debt, it is evidence of a debt. It is a transfer of an interest in land, from the owner to the mortgage lender, on the condition that this interest will be returned to the owner of the real estate when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower.                                                                                                                                                           The term comes from the Old French "dead pledge," apparently meaning that the pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure. In many countries it is normal for home purchases to be funded by a mortgage. In countries where the demand for home ownership is highest, strong domestic markets have developed, notably in Spain, the United Kingdom, the Commonwealth of Australia and the United States. Mortgagee legally termed for the mortgage lender.                                                                                     The main function of the mortgage is to provide security to the lender. The lender loans the money and registers the mortgage against the title to the property. The borrower gives the lender the mortgage as security for the loan, receives the funds, makes the required payments and maintains possession of the property. The borrower has the right to have the mortgage discharged from the title once the debt is paid. If the mortgagor fails to repay the loan according to the conditions set forth by the lender, then the mortgagee reserves the right to foreclose on the property. Borrower is termed as Mortgagor,  who owes the obligation secured by the mortgage, and may be multiple parties. Generally, the debtor must meet the conditions of the underlying loan or other obligation and the conditions of the mortgage.                                                                 

Types of legal mortgage                                                                                                                                                                               Mortgage by redemption or mortgage by demise: In a mortgage by demise, the creditor becomes the owner of the mortgaged property until the loan is repaid in full (known as "redemption"). This kind of mortgage takes the form of a conveyance of the property to the creditor, with a condition that the property will be returned on redemption.

Mortgage by legal charge: In a mortgage by legal charge or technically "a charge by deed expressed to be by way of legal mortgage", the debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it. In Pakistan, the mortgage by legal charge is most common way used by banks to secure the financing. It is also known as registered mortgage. After registration of legal charge, the bank's lien is recorded in the land register stating that the property is under mortgage and cannot be sold without obtaining an NOC (No Objection Certificate) from the bank.

Equitable mortgage: In an equitable mortgage the lender is secured by taking possession of all the original title documents of the property and by borrower's signing a Memorandum of Deposit of Title Deed (MODTD). This document is an undertaking by the borrower that he/she has deposited the title documents with the bank with his own wish and will, in order to secure the financing obtained from the bank.

Simple Mortgage: A simple mortgage does not involve giving the possession of the mortgagor's property to the mortgagee. It is under mutual agreement that in case of non-payment by the mortgagee to the mortgagor within the specified time, the mortgagee can cause the mortgaged property to be sold in accordance with law and have the sale proceeds adjusted towards the payment of the mortgage money.

Mortgage by Conditional Sale: This type of mortgage entails the apparent sale of property by the mortgagor to the mortgagee on a conditional basis, that on default by mortgagor, the sale shall become absolute and complete. If the mortgagor repays his loan, the sale shall become null and void.

Usufructuary Mortgage: This type of mortgage, by an express or implied term gives possession to the lender and gives him rights to accrue the rents or income coming from that property as repayment for interest and mortgage money till the time repayment is complete. There is no time limit for payment of the mortgage money.

English Mortgage: The mortgagor transfers the mortgaged property to the mortgagee in entirety. However there is a condition that on complete repayment of the repayment money, he will re-transfer the property back to himself.

Reverse Mortgage: Reverse mortgage involves lending money to senior citizens against mortgage of their property (house) and there is no need of repaying the same. The loan is awarded as a lump sum amount or as monthly installments. In the event of death of the mortgagor, the property goes into the possession of the mortgagee.

Anomalous Mortgage: A mortgage that does not fall under the purview of any of the mortgage types is called an anomalous mortgage.

Conditions attached with mortgage: [1] While mortgaging property, only legal rights are transferred to the mortgagee but not the possession [2] An instrument of mortgage deed is mandatory [3] On sale of a mortgaged property, the mortgage flows along with the property.

Adv.K.C.Suresh, Kerala