Equitable Mortgage
Buvaneswari
(Querist) 25 November 2010
This query is : Resolved
Respected Experts, I would like to know about equitable mortgage. I am working for a profit making private trust in chennai lending to lower income group. We planned to provide house renovation loans by accepting title deed as collateral. As our loan size is small & cost of registered mortgage is high, we would like to create equitable mortgage. what is the procedure to do this and how to execute in case of default? Thanks in advance..
ESTHERPRIYA
(Expert) 25 November 2010
It is a complex matter Buvaneshwari. The thing is you can lend money but certain clauses to be there for taking the property in case default occurs for which English Mortgage will suit and it is now prevalent because in case of Equitable Mortgage, you need to apply to court for taking possession and again to court for auction and it costs heavily thus you should first choose the right thing and then go its implementation. In case you need any clarification contact us at S&P Law Associates, Law Firm at sandplawassociates@gmail.com.
Devajyoti Barman
(Expert) 25 November 2010
Equitable mortgage is cretated by deposit of titile deed and the same does not require registration. However equitable mortgage by deposiit of titile deed is permissible in certain Metro cities in India which include Chennai.
You need not bother about the drafting the clauses as the Bank which would grant the loan provide such prescribed format of agreements.
Parthasarathi Loganathan
(Expert) 25 November 2010
To supplement Barman da's opinion, I would suggest to narrate the action of deposit of title deeds in a register specifying the intention of the mortgagor to mortgage his property by personally calling you to convey the legal title. This action to be duly acknowledged listing out all the documents deposited on the previous day by the mortgagor.
Tarun Thakur
(Expert) 26 November 2010
On one side you are saying that you will be lending to smaller income group persons..
It means that your firm wants to lend small amount of loan..
why are you indulging in expensive mode of lending money..
The cheapest mode of lending money is through promisory notes and taking Cheques from the borrower..
For this you must take money lending license first..
Buvaneswari
(Querist) 27 November 2010
Thank you all for the expert opinion..To answer tarun thakur's question..We have the required license and planned to lend upto 1.5 laks for house renovation purpose. We already have the process of collecting promissory note & cheques. Our experience with this group of people forced us to collect some sort of collateral for higher loan amounts. I would work out the cost of mortgage to take final decision.
Sri Vijayan.A
(Expert) 27 November 2010
Dear Buvana,
I agree ur point
It is safer to get the title deeds of the property as security for the loan.
For Equitable mortgage, registration is not necessary. (I have replied ur same question with another tag)
The cost of registration shall be around Rs.2000 + incidental charges
Parthasarathi Loganathan
(Expert) 01 December 2010
However, Equitable Mortgage by simple deposit of title deeds is as safe as Registered Mortgage for such lendings.
Advocate. Arunagiri
(Expert) 01 December 2010
Deposit of title deed is enough, just obtain a letter from the title holder that he is depositing the title deeds, for the purpose of availing loan.
