Mortgage Definition under Section 58, Parties in Mortgage Transaction and different types of mortgage explained in simple words – Mortgage is defined under section 58(a) of Transfer of Property Act, 1882. Mortgage is a legal agreement used for securing a loan where a person uses an immovable asset as collateral for the loan.
Section 58(a) of transfer of property act 1882, define a mortgage as follows:
“A mortgage is 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.”
Parties to Mortgage
Mortgagor, Mortgagee, Mortgage money, Mortgage deed – defined
Mortgagor – The person who transfer his property i.e, Transferor is called a mortgagor.
Mortgagee – The person to whom the property is being transferred i.e, Transferee is called mortgagee.
Mortgagee Money – The principal money and interest amount payment of which is secured for the time being are called the mortgage money.
Mortgage Deed – The legal document or instrument by which the transfer is effected is called the mortgage deed.
Types of Mortgage
Section 58 under transfer of property act,1882 classified the mortgage into six types –
- Simple Mortgage
- Mortgage by Conditional Sale
- Usufructuary mortgage
- English Mortgage
- Mortgage by deposit or title deeds
- Anomalous Mortgage
In Simple mortgage, the mortgagor does not deliver the possession of the property . But the mortgagor binds himself personally to repay the mortgage money and agrees either expressly or impliedly, that in case of his/her failure to pay according to agreement, the mortgagee shall have a right to cause the mortgaged property to be sold and apply the sale proceeds in payment of the mortgage money. The transaction is called simple mortgage and mortgagee a simple mortgagee.
However, it must be noted that the mortgagee has no right to sell the property without obtaining decree of the court. Mortgagee can –
- apply to the court for permission to sell the mortgaged property or
- file a suit for recovery of the whole amount without selling the property.
Mortgage by Conditional Sale
In this type of mortgage, the mortgagor ostensibly sells the property to the mortgagee on on following conditions –
- Sale shall become absolute on default in payment of the mortgage money on a certain date.
- Sale shall become void on payment of mortgage money.
- Mortgagee will re transfer the property to seller on payment of mortgage money.
The transaction is called 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.
In this type of mortgage, the mortgager delivers possession of the property or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee. The mortgagor authorises the mortgagee to retain possession until the mortgage money is repaid. The mortgagor reserves the right to recover the property when the mortgage money is repaid. Also the mortgagee is entitled to receive rent and profit accruing from the property till the loan is repaid and appropriate the same in lieu of interest or in repayment of the loan or both.
The transaction is called an usufructuary mortgage and the mortgagee an usufructuary mortgagee.
The mortgager is not personally liable to repay the mortgage money. So the mortgagee cannot sue the mortgager for repayment. He can neither sue foreclosure nor sue for sale of the mortgaged property; the only remedy for the mortgagee is to remain in possession of the property and pay himself out of the rents or profits of the mortgaged property. Since there is no time limit he has to wait for a very long time to recover his dues.
In this form of mortgage, mortgagor binds himself to repay the mortgage money on a certain date and transfer the property absolutely to the mortgagee, but on a condition that he will re transfer it to mortgagor upon payment of mortgage money. The transaction is called English mortgage.
Mortgage by deposit of title deeds (Equitable Mortgage)
In this mortgage, the mortgagor delivers the title document of the immovable property to the mortgagee or creditor with intent to create a security thereon. The transaction is called mortgage by deposit of title deeds or equitable mortgage. This type of mortgage requires no registration. . Such a mortgage is restricted to the towns of Kolkata, Mumbai and Chennai and other towns notified by the State government for this purpose in the Official Gazette.
A mortgage which doesn’t fall under any of the above five types of mortgage. Such a mortgage is effected as per the terms and conditions as agreed by the mortgagor and mortgagee.