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What is Mortgage

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4 views

What is Mortgage

Uploaded by

snehachezhiyan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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What is Mortgage?

When property, land or any other commodity is used as collateral to borrow


money or to take a loan from a lender, it is known as Mortgage. In simpler
terms, when a person borrows money from a lender (bank loans) and signs up
an agreement where he/she gets cash in exchange for a real estate property
as a guarantee with the bank until the entire amount is repaid is called a
mortgage.

A few important pointers related to Mortgage have been given below:

 The borrower and lender both are uncertain about profit/loss in case of a mortgage.
The lender is uncertain if the borrower will be able to pay the sum of money back or
not and in case the borrower is unable to pay the lender back, he shall be in complete
loss of the asset
 If the borrower is not able to pay back the loan amount, the lender has full authority
over the mortgaged product
 The one who takes the loan is called a “debtor” and the one who lends money is
called the “creditor”
 Loan is a contract between the lender and borrower when one lends money and the
other borrows it at a certain rate of interest. Mortgage, on the other hand, is a type of
loan in which the real estate or property element is added as a guarantee if the mount
is not retired to the lender

Types of Mortgages

Discussed below are the different types of mortgages:

 Simple Mortgage: In such type of mortgage, the borrower needs to sign an


agreement stating that if he/she is unable to pay back the borrowed amount in
specified time duration, then the lender can sell the property to anyone to get his
money back
 Mortgage by Conditional Sale: Under such mortgage, the lender can put a certain
number of conditions which the borrower must follow in terms of repayment. These
conditions may include the sale of the property if there is a delay in the monthly
instalments, an increase in the rate of interest due to delay in repayment, etc.
 English Mortgage: In this type of mortgage, the borrower has to transfer the property
in the name of the lender at the time of taking money, at a condition that the property
would be transferred back to the borrower once the complete amount is paid back
 Fixed-Rate Mortgage: When the lender assures the borrower that the rate of interest
will remain the same throughout the loan period is called Fixed-Rate Mortgage
 Usufructuary Mortgage: This kind of mortgage gives a benefit to the lender. The
lender has the right over the property for the due course of the loan period, he can put
the property on rent or use it for other purposes until the repayment of the amount.
But the main rights lie with the owner himself
 Anomalous Mortgage: A combination of different types of mortgages is called an
Anomalous Mortgage
 Reverse Mortgage: In this case, the lender lends money to the borrower on a
monthly basis. The entire loan amount is divided into instalments and the lender gives
the borrower that money in instalments
 Equitable Mortgage: In this type of mortgage, the title deeds of the property are
given to the lender. This is a common phenomenon in the banking mortgage loans. It
is done to secure the property

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