Understand Various Kind of Mortgages Under the Transfer of Property Act, of 1882

Understanding the meaning of mortgage and their types is essential while applying for secured loans. Under the Transfer of Property Act 1882, there are about six types of mortgages.

Once an individual has understood the 6 different types of mortgage loans, they can decide on the most suitable one. This aids them in making more informed choices during the loan application process. Each type is associated with some specific features that are the primary basis of difference among these types.

What are the different types of mortgages?

The different types of mortgages included in the Transfer of Property Act 1882 are as follows: 

  • Simple mortgage

In this type of mortgage, borrowers bestow the rights to sell that property to their lender in case they are unable to repay their loan. However, a creditor does not get ownership of that property. They can only use these revenues obtained from selling it to settle the loan.

  • Usufructuary mortgage

Here, a loan seeker transfers the ownership of property to their creditor, who can retain it until the credit is settled. The creditor uses the money from the rent of that mortgage for loan repayment. However, the borrower receives a particular part of the revenue generated from rent or profit. 

  • English mortgage

The lender transfers this type of property in the name of a mortgagee. This mainly takes place while applying for a loan against property. However, there is a condition that once they repay their loan on an agreed date, their lender will have to re-transfer it in their name. Nonetheless, in case of defaults, lender will have to sell the property to settle their credit. 

  • Anomalous mortgage

Any collateral that does not fall under rest of the categories is referred to as an anomalous mortgage. Also, they can be a combination of two or more types of mortgage. The rights and liabilities for this type are decided between the lender and the borrower. However, in case of default, if a mortgagor is unable to repay the loan, the mortgagee becomes the owner of this property. 

  • Mortgage by conditional sale

For this mortgage type, a borrower sells their property on a condition that if they repay their credit, the deal will stand void. Under such circumstances, the purchaser will have to return it to the seller. However, in case of a default, the sale becomes irreversible, and the seller ends up losing their property. Hence, it is crucial for individuals to know how they can repay their existing loan to devise the right strategy.

  • Mortgage by deposit of title deeds

Also known as an equitable mortgage, for this type, the mortgagor only needs to submit a title of deed while applying for credits. This deed acts as collateral for the credit and does not demand the physical delivery of these documents. However, it is crucial to keep in mind that individuals can opt for this mortgage type in some selected areas only. 

In addition to this, one must be aware of some essential guidelines associated with the Transfer of Property Act. 

Important guidelines of the Transfer of Property Act of 1882

Some of the critical elements of this Act are as follows:

  • Only an adult with a sound state of mind is eligible to transfer a property. 
  • They can furnish mortgage papers while submitting the other necessary documents that are needed to apply for a loan against property.
  • One must not be in a state of intoxication or legally forbidden while transferring their property.
  • Individuals cannot transfer property in name of an unborn child. However, the lender can transfer their property to a legal guardian.
  • During any political unrest, individuals cannot conduct a valid transfer of property.
  • Individuals must transfer the property prior to the issuance of a deed.
  • One can transfer his or her property only when he or she is alive. 
  • Under some crucial circumstances, the mortgagor can even transfer a property verbally.

In conclusion, individuals can get unlimited benefits on mortgage loans for utilising the borrowed capital to purchase a residential property or bear certain business expenses. The other benefit is available only on the total interest component of their EMIs. This way, they can get a little respite against the burdensome income tax.

There are some financial institutions that provide pre-approved offers on different types of mortgage loans, such as home loans or loan against property. This hastens the loan approval process to meet financial urgencies. Individuals can check their pre-approved offer by entering their name and mobile number.

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