What is a Mortgage

What is a Mortgage?

A legal agreement that conveys the conditional right of ownership
on an asset or property by its owner (the mortgagor) to a lender
(the mortgagee) as security for a loan. The lender's security interest
is recorded in the register of title documents to make it public
information, and is voided when the loan is repaid in full.

Mortgage is Defined in Section 58 of Transfer Of Property Act,
1882 as:
" Mortgage"," mortgagor"," mortgagee"," mortgage- money" and"
mortgage- deed" defined.- (a) A mortgage is the transfer of an
interest in specific immoveable 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. The
transferor is called a mortgagor, the transferee a mortgagee; the
principal money and interest of which payment is secured for the
time being are called the mortgage- money, and the instrument (if
any) by which the transfer is effected is called a mortgage- deed.

Virtually any legally owned property can be mortgaged, although
real property (land and buildings) are the most common. When
personal property (appliances, cars, jewelry, etc.) is mortgaged, it
is called a chattel mortgage.

In case of equipment, real property, and vehicles, the right of
possession and use of the mortgaged item normally remains with
the mortgagor but (unless specifically prohibited in the mortgage
agreement) the mortgagee has the right to take its possession (by
following the prescribed procedure) at any time to protect his or
her security interest. In practice, however, the courts generally do
not automatically enforce this right when it involves a dwelling
house, and restrict it to a few specific situations. In the event of a
default, the mortgagee can appoint a receiver to manage the
property (if it is a business property) or obtain a foreclosure order
from a court to take possession and sell it. To be legally
enforceable, the mortgage must be for a definite period, and the
mortgagor must have the right of redemption on payment of the
debt on or before the end of that period.

Mortgages are the most common type of debt instruments for
several reasons such as lower rate of interest (because the loan is
secured), straight forward and standard procedures, and a
reasonably long repayment period. The document by which this
arrangement is effected is called a mortgage bill of sale, or just a
mortgage.

Provisions for Mortgage Under Transfer of Property
Act, 1882

69. Power of sale when valid.-

(1) A mortgagee, or any person acting on his behalf, shall, subject
to the provisions of this section, have power to sell or concur in
selling the mortgaged property, or any part thereof, in default of
payment of the mortgage- money, without the intervention of the
Court, in the following cases and in no others, namely:--]

(a) where the mortgage is an English mortgage, and neither the
mortgagor nor the mortgagee is a Hindu, Muhammadan or
Buddhist 1[ or a member of any other race, sect, tribe or class
from time to time specified in this behalf by 2[ the State
Government], in the Official Gazette];

(b) where 3[ a power of sale without the intervention of the
Court is expressly conferred on the mortgagee by the
mortgage- deed and] the mortgagee is 4[ the Government];

(c) where 3[ a power of sale without the intervention of the
Court is expressly conferred on the mortgagee by the
mortgage- deed and] the mortgaged property or any part
thereof 5[ was, on the date of the execution of the mortgage-
deed], situate within the towns of Calcutta, Madras, Bombay,
6[ 7[ or in any other 8[ town or area which the State
Government may, by notification in the Official Gazette,
specify in this behalf].

60. Right of mortgagor to redeem

At any time after the principal money has become 1[ due],
the mortgagor has a right, on payment or tender, at a proper
time and place, of the mortgage- money, to require the
mortgagee

(a) to deliver 2[ to the mortgagor the mortgage- deed and all
documents relating to the mortgaged property which are in
the possession or power of the mortgagee],

(b) where the mortgagee is in possession thereof to the
mortgagor, and

(c) at the cost of the mortgagor either to re- transfer the
mortgaged property to him or to such third person as he may
direct, or to execute and (where the mortgage has been
effected by a registered instrument) to have registered an
acknowledgment in writing that any right in derogation of
his interest transferred to the mortgagee has been
extinguished: Provided that the right conferred by this
section has not been extinguished by act of the parties or by
3[ decree] of a Court. The right conferred by this section is
called a right to redeem and a suit to enforce it is called a suit
for redemption. Nothing in this section shall be deemed to
render invalid any provision to the effect that, if the time
fixed for payment of the principal money has been allowed to
pass or no such time has been fixed, the mortgagee shall be
entitled to reasonable notice before payment or tender of
such money. Redemption of portion of mortgaged property.
Nothing in this section shall entitle a person interested in a
share only of the mortgaged property to redeem his own
share only, on payment of a proportionate part of the
amount remaining due on the mortgage, except 4[ only]
where a mortgagee, or, if there are more mortgagees than
one, all such mortgagees, has or have acquired, in whole or
in part, the share of a mortgagor.

67. Right to foreclosure or sale

In the absence of a contract to the contrary, the mortgagee
has, at any time after the mortgage- money has become due
to him, and before a decree has been made for the
redemption of the mortgaged property, or the mortgage-
money has been paid or deposited as hereinafter provided, a
right to obtain from the Court that the mortgagor shall be
absolutely debarred of his right to redeem the property, or 2[
a decree] that the property be sold. A suit to obtain 2[ a
decree] that a mortgagor shall be absolutely debarred of his
right to redeem the mortgaged property is called a suit for
foreclosure.












According to Section 58 of the Transfer of Property Act, 1882, a
mortgage is the transfer of an interest in specific immoveable
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 agreement which may give rise to
pecuniary liability.
The transferor is called a mortgagor, the transferee a mortgagee;
the principal money and interest the payment of which is secured
for the time being are called the mortgage money and the
instrument by which the transfer is effected is called the mortgage
deed.

Essentials of a Mortgage

Transfer of Interest: The first thing to note is that a mortgage is a
transfer of interest in the specific immovable property. The
mortgagor as an owner of the property possesses all the interests in
it, and when he mortgages the property to secure a loan, he only
parts with a part of the interest in that property in favour of the
mortgagee. After mortgage, the interest of the mortgagor is
reduced by the interest which has been transferred to the
mortgagee. His ownership has become less for the time being by
the interest which he has parted with in favour of the mortgagee. If
the mortgagor transfers this property, the transferee gets it subject
to the right of the mortgagee to recover from it what is due to him
i.e., the principal plus interest.
Specific Immovable Property: The second point is that the property
must be specifically mentioned in the mortgage deed. Where, for
instance, the mortgagor stated “all of my property” in the mortgage
deed, it was held by the Court that this was not a mortgage. The
reason why the immovable property must be distinctly and
specifically mentioned in the mortgage deed is that, in case the
mortgagor fails to repay the loan the Court is in a position to grant
a decree for the sale of any particular property on a suit by the
mortgagee.
To Secure the Payment of a Loan: Another characteristic of a
mortgage is that the transaction is for the purpose of securing the
payment of a loan or the performance of an obligation which may
give rise to pecuniary liability. It may be for the purpose of
obtaining a loan, or if a loan has already been granted to secure the
repayment of such loan. There is thus a debt and the relationship
between the mortgagor and the mortgagee is that of debtor and
creditor. When A borrows 100 bags of paddy from B on a
mortgage and agrees to return an equal quantity of paddy and a
further quantity by way of interest, it is a mortgage transaction for
the performance of an obligation.
Where, however, a person borrows money and agrees with the
creditor that till the debt is repaid he will not alienate his property,
the transaction does not amount to a mortgage. Here the person
merely says that he will not transfer his property till he has repaid
the debt; he does not transfer any interest in the property to the
creditor. In a sale, as distinguished from a mortgage, all the
interests or rights or ownership are transferred to the purchaser. In
a mortgage, as stated earlier, only part of the interest is transferred
to the mortgagee, some of them remains vested in the mortgagor.
To sum up, it may be stated that there are three outstanding
characteristics of a mortgage:
The mortgagee’s interest in the property mortgaged terminates
upon the performance of the obligation secured by the mortgage.
The mortgagee has a right of foreclosure upon the mortgagor’s
failure to perform.
The mortgagor has a right to redeem or regain the property on
repayment of the debt or performance of the obligation.

Kinds of Mortgages

There are in all six kinds of mortgages in immovable property,
namely:
Simple mortgage.
Mortgage by conditional sale.
Usufructuary mortgage.
English mortgage.
Mortgage by deposit of title-deeds or equitable mortgage.
Anomalous mortgage.