Finance

What is Mortgage and Various Types of Mortgage?

A mortgage is defined as a way to use one’s property as a guarantee in order to get money as a loan from someone. This property has to be real like a flat, land, house, or building.

If we define it in a technical manner then the mortgage is explained as the mode to secure the payment of money by transfer of an interest in the unmovable property. And there are different types of Mortgages which we will describe below.

There are two types of people in the mortgage the debtor and the creditor.

  • The debtor is the one who owns the property and
  • The creditor is the one who keeps the property as a guarantee and gives money as a credit to the debtor.

The debtor has to pay money with interest in a specific period of time to the creditor. The creditor has the right to own the property if the debtor fails to return money in a specific period of time.

In other words, the mortgage has also termed a loan. You might have heard of this term. Earlier rich people used to provide loans to small workers. In this way, they could earn money in the form of interest without much hard work.

These days, people turn to the banks like ICICI Bank for any form of loan. All the terms and conditions are decided beforehand and a contract is created to seal the deal for the loan.

What is Mortgage and Various Types of Mortgage lotoo

Brief Description About All Types Of Mortgage

What is Simple Mortgage?

A simple Mortgage is actually one of the simplest types of mortgage. Here, the mortgagor will request money as a loan with delivering the complete possession of his or her property to the mortgagee.

Mortgagor will have to agree to the contract where the mortgagee will have the right over the property and can sell it if the mortgagor fails to repay the debt in the given period of time.

However, the mortgagee needs the court’s intervention in this process. The mortgagee will have to obtain permission from the court to sell the property to recover the mortgage amount. This type of mortgage is called a simple mortgage.

Get to Know English Mortgage

In the case of an English Mortgage, the mortgagor will bind himself to pay the complete mortgage amount on a specific date. Along with binding himself for repayment, the mortgagor has to transfer his or her real property to the mortgagee.

The transfer is made with a provision that once the payment is received mortgagee will again transfer the property to the owner.

For example, you want to mortgage a flat with an English mortgage policy. You will receive the money and you will transfer the ownership to the mortgagee until you repay the amount. Soon after the payment, you will become the owner of your flat again.

Understanding Usufructuary Mortgage

Usufructuary is a special type of mortgage. Here, the mortgagor needs to deliver the possession of his or her property either implicitly or expressly to the mortgagee. The mortgagee is authorized to retain the possession of the property until the mortgagor returns the full amount with interest.

During this time period, the mortgagee will receive the rent or profit associated with the mortgaged property. The mortgagee will receive this amount as part of the loan amount that the mortgagor is responsible to pay.

For example, you own a flat that is given on rent and you are using it as a mortgage. So the mortgagee will own the property and receive the rent of this flat. The amount will be deducted from the loan amount.

Getting Familiar with Mortgage By Deed Deposits

The mortgage by deed deposits is also termed an equitable mortgage. Here, the mortgagor will deposit the title deed of his or her immovable property to the mortgagee. It is considered security until the loan is repaid.

There is no legal procedure involved to give a charge of the property to the mortgagee. Also, it is not necessary that an official written memorandum be created for the deposit of the title deed. There is a restriction on the towns that are allowed to use equitable mortgages in their area.

Both parties must sign an agreement that the property is only kept as security and the loan will be repaid in a certain period of time.

Meaning of Mortgage By Conditional Sale

Just as the name suggests there are conditions in the mortgage by conditional sale. The mortgagor will sell a property that he or she wants to mortgage with certain conditions.

The sale of the property to the mortgagee will be valid if the mortgagor fails to repay the amount. If the mortgagor repays money then the sale will either become void or the mortgagee will re-transfer it to the mortgagor.

Significance of Anomalous Mortgage

A mortgage that is not a Simple mortgage, an English mortgage, Equitable Mortgage, Mortgage by conditional sale, and Mortgage by deed deposit is an Anomalous mortgage. This mortgage is not directly one of these mortgages but created by the combination of the above mortgages.

So there is no single criterion that can define it. These could be combined in any form depending on their usage.

Conclusion: Mortgages are used by homebuyers by selling their house to the mortgagee. They claim their control over the house in case of default in repayment of the mortgage. This happens on the subject of a residential mortgage.

In the case of business, people don’t want to invest a full amount so they use a mortgage to pay the amount and keep repaying the amount with interest while earning money through their business.

The mortgages also vary on the basis of the interest rate. If the interest rate remains constant during the complete lifetime of the loan it is called a fixed-rate mortgage. In the case of adjustable-rate mortgages, the initial rate of interest remains fixed but it varies according to the market’s updates.

Mortgages do come with a lot of variables based on the type of mortgagee you are planning to take a loan from. If you are planning to take any form of mortgage you must research the present scenarios in the market. In the case of the high mortgage amount, it is advised to take the help of an expert.

Although you will have to pay some amount for the expert’s help, it will prove to be the best decision with their expertise in the mortgage field.

Hope you understand the information about Mortage and types of mortgage. Don’t forget to share this article and comment below if you have any doubts. thank you.

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