To put it simply, mortgage refers to the transfer of interest in a particular immovable property. This means that the owner of the property transfers some of the ownership rights to the mortgagee while retaining other rights with themselves. The different forms of immovable properties are land and other properties such as buildings, trees, and machinery that are attached to the soil. A condition is placed on the mortgage agreement by which the transfer of the ownership becomes void when the debtor successfully pays off the debt. Mortgage can be of various types and before taking a mortgage, it is important that one should be aware of the variations.
1. Simple mortgage
In this type of mortgage, the mortgagors do not transfer the possession of the mortgaged property; rather they bound themselves for the payment of the mortgage money. They agree that in the event of failure of payment as per the agreement, the mortgagee will hold the right to sell the mortgaged property. The revenue generated from this sale will be used for the payment of the mortgage money. However, the mortgagee requires an intervention of the court to sell the property as they cannot carry it out directly by themselves.
2. English mortgage
In this form of taking a mortgage, the mortgagor agrees to pay the mortgaged money on a specific date. The mortgaged property is transferred to the mortgagee who is entitled to take complete possession of it immediately. Under some circumstances, they might carry out the sale of a mortgaged property without any kind of interference from the court. However, the transfer is agreed on the condition that the mortgaged property will be re-transferred to the mortgagor once they make a complete payment of the agreed mortgage money.
3. Mortgage by conditional sale
Another way of taking a mortgage is by a conditional sale. In this case, a condition is laid that on the failure of payment of mortgage money on a fixed date, the sale will become absolute. On the other hand, if the payment is being successfully made, the sale will become void or the buyer will transfer the property to the seller.
4. Mortgage by deposit of title deeds
In this type of mortgage, the owner of the immovable property delivers the document of their ownership to the creditor or the agents, to provide security. This type of mortgage does not require any form of registration and is quite popular with the banks.
5. Usufructuary mortgage
It is another way of taking a mortgage, where the mortgagor either delivers or agrees to deliver the mortgagees, the proprietorship of the mortgaged property and authorizes them to retain this ownership till the time of full payment of the mortgage money. They are also allowed to receive complete or a part of the rent and profit generated from the property. They can treat this rent or profit as a substitute of interest or payment of the mortgage money or both.
There is another form of mortgage, known as anomalous mortgage, which is formed as a combination of two or more types of mortgages discussed above. Therefore, it can be said that the types of mortgages are formed based on local usage, custom or contract.