A mortgage is defined under Section 58(a) of the Transfer of Property Act, 1882, as the transfer of an interest in specific immovable property to secure the payment of a loan, an existing or future debt, or the performance of an obligation that may result in financial liability. Unlike sale, exchange, or gift, which transfer full ownership, a mortgage involves a limited transfer of rights in the property.
Types of Mortgages
The Transfer of Property Act, 1882, under Section 58(b) to (g), classifies mortgages into six types:
1. Simple Mortgage (Section 58(b))
A simple mortgage does not involve the transfer of possession of the property. The mortgagor remains personally liable for repayment, and if they fail to pay, the mortgagee has the right to:
- File a suit for recovery of money.
- Seek a court order for the sale of the mortgaged property.
A registered document is mandatory for simple mortgages, regardless of the loan amount.
2. Mortgage by Conditional Sale (Section 58(c))
This type of mortgage resembles a conditional sale, where the borrower seemingly "sells" the property with the understanding that upon loan repayment, the property will be returned. If the borrower fails to repay, the sale becomes final.
Key conditions:
- The property is transferred with an apparent sale condition.
- The agreement must clearly state that the sale becomes absolute on non-repayment or void upon repayment.
- The mortgage must be registered if the loan amount is ₹100 or more.
3. Usufructuary Mortgage (Section 58(d))
Here, the mortgagor gives possession of the property to the mortgagee, who then enjoys the income (e.g., rent, produce) until the debt is repaid.
Key features:
- The borrower is not personally liable for the debt.
- The mortgagee cannot seek foreclosure or sale of the property.
- The usufruct (income) generated from the property is used for repayment.
4. English Mortgage (Section 58(e))
In an English mortgage, the property is fully transferred to the mortgagee with a condition that upon full repayment by a specified date, it will be returned to the mortgagor.
Key elements:
- The borrower must promise to repay the debt by a specific date.
- The property is transferred absolutely to the mortgagee but with a condition to re-transfer upon payment.
- The mortgage must be registered if the loan is ₹100 or more.
5. Mortgage by Deposit of Title Deeds (Section 58(f))
This is a unique type of mortgage where the borrower simply hands over the title deeds (ownership documents) to the lender as security, without executing a formal mortgage deed.
Key points:
- No written agreement is necessary, only the physical deposit of title documents.
- It is legally recognized only in specified cities (e.g., Kolkata, Mumbai, Chennai) or other areas notified by the government.
- Unlike other mortgages, registration is not mandatory.
6. Anomalous Mortgage (Section 58(g))
If a mortgage does not fall under any of the five standard categories, it is called an anomalous mortgage. It can be a combination of different types, such as:
- Simple mortgage + Usufructuary mortgage
- Usufructuary mortgage + Conditional sale mortgage
- Customary mortgage forms
An anomalous mortgage must be in writing and attested like other mortgage types.
Conclusion
Mortgages play a crucial role in securing loans against immovable property, ensuring both lender security and borrower access to credit. Different mortgage types offer varying levels of protection and liability, depending on whether possession is transferred, the loan is personally secured, or repayment terms are strictly defined. Understanding these categories is essential for legal professionals and individuals dealing with real estate transactions.
