A mortgage loan is a system in which the borrower uses the value locked in their property to cover expenses. However, before taking a loan, it’s crucial to understand the property mortgage laws of India.
A property mortgage refers to the transfer of an interest in an immovable property. It is an arrangement in which one person pledges a property to an institution or an individual, receives money in return for a specific period, and gets the property’s ownership back after repaying the borrowed amount. However, if the borrower defaults and does not repay the amount within the repayment term, the lender gets the right to sell the property and compensate for the incurred loss.
Definitions to Understand
Section 58 defines the following terms applicable to mortgage laws:
- Mortgage: The transfer of an interest in an immovable property. It aims at securing the payment, a future or existing debt, or engagement performance that gives rise to a pecuniary liability.
- Mortgagor: The person who mortgages the owned property.
- Mortgagee: The person to whom the mortgagor transfers the property.
- Mortgage Deed: An instrument to affect the transfer.
- Mortgage Money: The principal money and the mortgage loan interest to secure the payment.
Essential Components of a Mortgage Law
According to section 58, these are the three essential components of a mortgage:
- Transfer of Interest: Transfer of interest does not mean the transfer of ownership. A mortgage is only a right to secure due debt payment. The quantity and nature of rights and interests depend on the form and kind of mortgage.
- Immovable Property: The pledged property should be an immovable property with a particular mention in the deed.
- The intention of Securing the Payment: The sole purpose of the transfer should be securing the debt.
These are the essential components to completing a mortgage transaction.
Different Types of Mortgages in India
Mortgage laws apply to different types of mortgage loans in India. These include:
Simple Mortgage: The mortgagor agrees to pay mortgage money to the mortgagee or gives them the right to sell off the property. The mortgagee does not receive the property’s possession in this type of mortgage.
Mortgage by Conditional Sale: The mortgagor gives the mortgagee a right to sell the property in case of a default. However, if the mortgagor repays the borrowed amount, the mortgagee’s right to sell the property becomes void.
Usufructuary Mortgage: The mortgagee gets the property’s possession until the mortgagor pays off the debt. Usually, profits or rent from the property goes towards the loan’s repayment.
English Mortgage: The mortgagor agrees to repay the borrowed amount on a particular date and transfers the property to the mortgagee. The mortgagee re-transfers the property to the mortgagor upon loan repayment.
Mortgage by Deposit of Title Deeds: The mortgagor delivers the immovable property’s title to the mortgagee to secure the debt payment.
Anomalous Mortgage: Any mortgage different from the mortgage mentioned above is considered anomalous.
Rights of the Mortgagor
Sections 60 to 76 discuss the rights of a mortgagor as follows:
- Right to redemption after repayment
- Right to transfer the property to a third party rather than re-transferring
- Right of documents production and inspection until they have the right to redemption
- Right to separate or simultaneous redemption
- Right to accession
- Right to improvements in the property made during the mortgage period
- Right to renew and grant the lease
Rights of the Mortgagee
The mortgagee is entitled to these rights in a mortgage loan:
- Right to sell or foreclose a property after repayment failure
- Right to sue the mortgagor for money
- Right to sell the property without court intervention
- Right to use the money received from the sale
- Right to accession
Liabilities of the Mortgagor and the Mortgagee
The mortgagor may use the property when in possession of the property. However, they must not perform any act that destroys or damages the property permanently. On the other hand, the mortgagee is responsible for managing the property, collecting profits and rents, paying the government revenues, and making the necessary repairs during the mortgage loan term.
These are the property mortgage laws of India, elaborating on the rights and liabilities of both parties in detail. The TPA (Transfer of Property Act) 1882 contains these laws, and they help secure a loan while protecting both parties’ mortgage loan interest. Although the Amendment Act 1929 made some amendments to the laws, no recent changes were made in the transactions. Those looking for a loan against the property must understand these property mortgage laws before taking the next steps.