Mortgage has been defined in Section 58(a) of Transfer of Property Act as "the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability"
It works on the simple idea of lien over another's property and is effected as an instrument between the lender and borrower. The borrower seeks a loan against the security of his property. This is done by transferring an interest of the immovable property to the lender and it entails pecuniary/financial liability as well. The person who advances loan against security is referred to as the 'mortgagor' and the one who seeks loan is the "mortgagee".
As per the Registration Act, 1908, when the money involved in the mortgage transaction is more than hundred rupees, a mortgage needs to be brought into effect by a registered instrument, duly signed by the mortgagor and two witnesses. If the money involved is less than hundred rupees, it can also be legitimized by delivery of property.
Mortgages can be on any freehold or leasehold immovable property.
Definitions:
- Debt / Mortgage Money: The principal borrowed
from the lender. The borrower in addition to the principal
has to pay the interest levied on it.
- Redemption: It means that the interest
transferred to the mortgagee during the transaction at the
time of the execution of mortgage would be vested back in
the mortgagor at the time of recovery.
- Mortgage Deed: It is a legal instrument
in accordance with the mortgage law in India and duly stamped
under Indian Stamp Act, 1889. It is legally binding on both
parties in the mortgage deal. It contains details of the
property owner, location of the property, size of property,
amount of mortgage, interest payable and time duration. It
also contains conditions upon which loan is agreed against property.
Procedure of effecting a Mortgage
- The mortgage deed is marked with the rights and obligations of both parties.
- The borrower with receives money from the lender.
- The mortgage money is to be paid back at a later date, mostly in accepted installments until a pledged programmed date.
- Money is to be reimbursed as a rule with interest and on contracted terms linking both the parties.
- It is expected that the borrower returns money within the time lines.
- Interest is intended on debt.
- The borrower guarantees to take back his property and to pay interest
- If the borrower fails to pay, the lender is capable of accruing money by selling the property or he may even carry out a legal act to make sure the money (interest and principal) is paid..
Rights of a mortgagor
- A mortgagor can redeem the mortgaged property.
- A mortgagor can transfer to third party the mortgaged property instead of re-transference to the mortgagor.
Rights of Mortgagee
- The right of foreclosure may be exercised by a mortgagee by a conditional sale or by anomalous mortgage.
- The mortgagee has a right to sue for the money under certain conditions, like going back on the promised money.
- The mortgagee has the power to sell the mortgaged property or a part thereof without the intervention of the court under a few conditions.