The term mortgage was first defined by the Transfer of Property Act, 1882. And in many ways, borrowing money against land, farm lands, precious goods or home everything was once considered property due to a deep burden of loans has been in practice since times immemorial.
However, over the decades, the world of finance and banking has regularized loans against properties and mortgage loans. Let’s take a look at two primary categories of mortgage loans:
In simple terms, if you own a property, and want to seek a loan on it from a reputed bank, you will have to sign an agreement, mortgage deed or loan document with the lender.
A mortgage deed will always define the terms of the loan and the principal and interest amounts to be paid to the lender. Before the disbursal of such a loan, the Bank ensures that it has the “Right to Sell” the borrower’s property if or when the terms of the mortgage deed are not met.
In usual circumstances, a registered mortgage satisfies every legal condition for establishing a mortgage or charge.
- The title to the property is returned to the borrower
- On the property, the lender’s rights as established through legal processes will be null and void
- If the borrower fails to repay the complete loan as per the agreement, the lender has the right to seize the property
Equitable mortgage comes from the term equity. In the context of financing, equity means in the interest of justice. Sometimes referred to as implied or constructive mortgage, the equitable mortgage is a type of financing arrangement under which the mortgagor (borrower) and the mortgagee (financial institution) mutually decide on the terms and conditions of the Mortgages loan. Under such type of financing, the government body or any other third party refrains from involvement.
Equitable Mortgage vs. Registered Mortgage: Key Differences
Since it is easy to confuse between these two mortgages loans, today we will look at the key differences between a registered mortgage and an equitable mortgage.
Now that you are familiar with both of these mortgage alternatives, deciding between them should not be a difficult task. In the long run, a registered mortgage is always preferred over an equitable mortgage because it benefits both the borrower and the lender.