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TYPES OF MORTGAGE

1. SIMPLE MORTGAGE: Section 58(b) of the Transfer of Property Act, 1882


defines Simple mortgage as follows

Where, without delivering possession of the mortgaged property, the


mortgagor binds himself personally to pay the mortgage-money, and agrees,
expressly or impliedly, that, in the event of his failing to pay according to his
contract, the mortgagee shall have a right to cause the mortgaged property
to be sold and the proceeds of sale to be applied, so far as may be necessary,
in payment of the mortgage-money, the transaction is called a simple
mortgage and the mortgagee a simple mortgagee.

In simple mortgage, the mortgaged property remains with the mortgagor. He


binds himself personally to pay the mortgage money. In case of default of such
payment, he agrees, expressly or impliedly, that the Mortgagee shall have the
right to recover dues by of the proceeds of sale of the mortgaged property. The
mortgagee can apply to the Court for permission to sell the property or file a suit
for recovery of amount without actually selling the property.
TYPES OF MORTGAGE

2. MORTGAGE BY CONDITIONAL SALE: Section 58(c) of the Transfer of
Property Act, 1882 defines Mortgage by Conditional Sale as follows

Where, the mortgagor ostensibly sells the mortgaged property-


on condition that on default of payment of the mortgage-money on a
certain date the sale shall become absolute, or
on condition that on such payment being made the sale shall become
void, or
on condition that on such payment being made the buyer shall transfer
the property to the seller,
the transaction is called a mortgage by conditional sale and the
mortgagee a mortgagee by conditional sale:

PROVIDED that no such transaction shall be deemed to be a mortgage,


unless the condition is embodied in the document which effects or
purports to effect the sale.
TYPES OF MORTGAGE

The essentials of a mortgage by conditional sale are:

It is an ostensible sale. This means that the sale appears to be true but in
reality, it isnt. It is just a mortgage even though the transaction resembles
that of sale.
This sale shall become void once the mortgagor pays the mortgage money
and the mortgagee shall retransfer the property to the mortgagee on such
payment.
In case of failure of payment, the sale becomes absolute.
The mortgagee, in case of such failure, can institute a suit for foreclosure
but has no right to sell the property. The foreclosure order so obtained
shall absolutely bar the mortgagor from his right to redeem/reclaim the
mortgaged property and the mortgagee becomes the absolute owner of
the property.
Such a transaction shall not be considered a mortgage if the
aforementioned conditions arent expressed in the deed effecting sale.
The mortgagor has to specify in the deed that he is selling his property as
a consideration subject to certain conditions.
TYPES OF MORTGAGE

3. USUFRUCTUARY MORTGAGE: Section 58(d) of the Transfer of Property Act, 1882
defines Usufructuary mortgage as follows

Where the mortgagor delivers possession or expressly or by implication


binds himself to deliver possession of the mortgaged property to the
mortgagee, and authorises him to retain such possession until payment of
the mortgage-money, and to receive the rents and profits accruing from the
property or any part of such rents and profits and to appropriate the same
in lieu of interest or in payment of the mortgage-money, or partly in lieu of
interest or partly in payment of the mortgage-money, the transaction is
called a usufructuary mortgage and the mortgagee a usufructuary
mortgagee.

In this form of mortgage, the mortgagor delivers the possession of the property to
the mortgagee and authorizes him to retain it till his debt is completely payed off.
The mortgagee is also entitled to receive any rent or profit arising from the property
and appropriate the same in lieu of interest or repayment of loan. The mortgagee
however, in case of default of payment, has no right to sue for foreclosure or sale,
but can retain possession of the mortgaged property till the rents and profits pay off
the debt.
TYPES OF MORTGAGE

4. ENGLISH MORTGAGE: Section 58(e) of the Transfer of Property Act,
1882 defines English mortgage as follows

Where the mortgagor binds himself to repay the mortgage-money on


a certain date, and transfers the mortgaged property absolutely to the
mortgagee, but subject to a proviso that he will re-transfer it to the
mortgagor upon payment of the mortgage-money as agreed, the
transaction is called an English mortgage.

In this kind of mortgage, the mortgaged property is transferred absolutely to


the mortgagee subject to the stipulation that such property shall be
retransferred to the mortgagor once the mortgage money is paid off (loan is
repaid). This payment has to be made by the specific date mentioned in the
deed providing validity to the transaction. In case of failure to pay mortgage
money, the mortgagee shall have the right to sell the mortgaged property
and move the court for the same. In certain instances, mentioned under
Section 69 of the Act, the mortgagee even has right to sell the property
without the interference of the Court.
TYPES OF MORTGAGE

5. MORTGAGE BY DEPOSIT OF TITLE DEEDS: Section 58(f) of the
Transfer of Property Act, 1882 defines Mortgage by Deposit of Title as
follows

Where a person in any of the following towns, namely, the towns of


Calcutta, Madras, and Bombay, and in any other town which the State
Government concerned may, by notification in the Official Gazette,
specify in this behalf, delivers to a creditor or his agent documents of
title to immovable property, with intent to create a security thereon,
the transaction is called a mortgage by deposit of title-deeds.

This type of mortgage is also called Equitable Mortgage. Herein, the


mortgagor delivers the title deeds of an immovable property to the
mortgagee with an intention to create a security on it. The existence of a
debt is must. The memorandum of deposit, in case of default of payment,
gives the mortgagee right to move court for sale of the mortgaged property.
If the payment is made, the title-deed is retransferred to the mortgagor.
This type of mortgage doesnt require registration.
TYPES OF MORTGAGE

6. ANOMALOUS MORTGAGE: Section 58(g) of the Transfer of Property
Act, 1882 defines Anomalous Mortgage as follows

A mortgage which is not a simple mortgage, a mortgage by conditional


sale, a usufructuary mortgage, an English mortgage or a mortgage by
deposit of title-deeds within the meaning of this section is called an
anomalous mortgage.

The definition given above defines Anomalous mortgage in a negative


sense, stating what it isnt. It is that mortgage which doesnt fall in either
of the aforementioned categories of Section 58. It is a composite
mortgage, i.e., combination of two or more of the above mentioned
mortgages. For example- a simple and usufructuary mortgage, a
usufructuary mortgaged accompanied by mortgage by sale, etc. The terms
and conditions of such mortgage are usually set by the mortgagor and
mortgagee themselves. In case of default of payment of the mortgage
money, the remedy is to obtain a decree by the Court for sale of the
mortgaged property.