Understanding Mortgage Essentials and Different Types

Mortgage

Definition of Mortgage:

A mortgage is security for the payment of debt. It is created by a written document providing security for the performance of a duty or the payment of debt. More specifically, a mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to pecuniary liability.

Key Terms:

• Mortgagor: The transferor (borrower) is called the mortgagor.
• Mortgagee: The transferee (lender) is called the mortgagee.
• Mortgage Money: The principal money and interest secured for payment is called mortgage money.
• Mortgage Deed: The instrument by which the transfer is effected is called a mortgage deed.

Essentials of a Mortgage:

1. Transfer of an interest
2. Specific property
3. Security for payment of a loan

Kinds of Mortgages

(i) Simple Mortgage:

In a simple mortgage, the mortgagor personally guarantees to pay the mortgage money without delivering possession of the mortgaged property. If the mortgagor fails to pay, the mortgagee has the right to sell the property and use the proceeds to recover the mortgage money.

(ii) Mortgage by Conditional Sale:

This type of mortgage involves an ostensible sale of the property. On default of payment, the sale becomes absolute. Upon payment, the sale becomes void, and the buyer (mortgagee) transfers the property back to the seller (mortgagor).

(iii) Usufructuary Mortgage:

The mortgagor delivers possession of the property to the mortgagee, who can retain possession and receive rents and profits until the mortgage money is paid. These rents and profits can be used to pay the interest or principal of the mortgage.

(iv) English Mortgage:

The mortgagor transfers the property absolutely to the mortgagee but with a provision for re-transfer upon full repayment of the mortgage money on a certain date.

(v) Mortgage by Deposit of Title Deed:

The mortgagor deposits the title deed of the property with the mortgagee as security for the loan.

(vi) Anomalous Mortgage:

Any mortgage that doesn't fall into the above categories is considered an anomalous mortgage.

Remedies for Mortgagor

1. Suit for sale
2. Suit for money

Determining a Conditional Mortgage

Courts use several tests to determine if a transaction is a sale with a condition of repurchase or a mortgage by conditional sale. These include:

1. Existence of Debt: Indicates a mortgage.
2. Long Repayment Period: Indicates a mortgage.
3. Interest Stipulation: Indicates a mortgage.

Conclusion

A mortgage is a transfer of interest in immovable property to secure a loan. Various types of mortgages exist, each with its own characteristics and implications. Understanding these different types is crucial for both borrowers and lenders.