Define Mortgage.

Question: Define Mortgage.

Find the answer to the mains question of Property Law only on Legal Bites. [Define Mortgage.]

Answer

A mortgage, as defined under the Transfer of Property Act (TPA), is a form of security provided by a borrower (mortgagor), who is the debtor, to the lender (mortgagee) for the repayment of a loan or the fulfillment of another obligation. The primary objective of a mortgage is to secure the debt or obligation, and it involves the transfer of a limited interest in specific immovable property. Section 58 of the TPA defines mortgage.

According to Section 58(a) of the TPA, a mortgage is the transfer of an interest in specific immovable property to secure the payment of money advanced as a loan, an existing or future debt, or the performance of an engagement leading to a pecuniary liability. The individual transferring the interest is termed the "mortgagor," while the recipient is the "mortgagee." The principal amount and interest being secured are referred to as the "mortgage money", and the instrument affecting the transfer is known as a "mortgage deed."

Elements of a Mortgage

The fundamental elements of a mortgage are:

1. Two parties.

2. Transfer of an interest.

3. Interest made in specific immovable property.

4. Transfer must be to secure the payment of a loan or to secure the performance of a contract.

Two Parties: The person who mortgages the property is a mortgagor, but a mortgagor includes a person deriving title under the original mortgagor, such as Heirs, or executors who drive their title from the mortgagor.

Transfer of Interest: There must be a transfer of an interest in immovable property. It is not a transfer of ownership like in a sale but only interest with a hope that in future the property will be taken if repay the loan. A mortgage is the transfer of interest and creates a right in rem, but a mere agreement to mortgage at a future time is not a mortgage.

Specific Immovable Property: To create a Mortgage, it is essential to specify the immovable property. Otherwise, it would be void of vagueness. It is a security against the loan and the property exists and there is no doubt about the property.

Consideration of Mortgage: A mortgage must be supported by consideration, which may be either money advanced by way of a loan, or existing or future debt or the performance of an engagement giving rise to a pecuniary liability.

There are various kinds of mortgages under Section 58 of the TPA, which are outlined below:

1. Simple Mortgage [Section 58(b) of TPA]:

In a simple mortgage, the mortgagor retains possession of the property and personally commits to paying the mortgage money. If there is a default, the mortgagee can realize the debt by causing the property's court-ordered sale. This type involves the transfer of only the interest, not ownership.

2. Mortgage by Conditional Sale [Section 58(c) of TPA]:

A mortgage by conditional sale involves an ostensible sale of the property, where it becomes absolute on default of payment. However, on payment, the sale becomes void or the buyer transfers the property back to the seller. It's a conditional sale intended as security for the debt, not an actual sale.

3. Usufructuary Mortgage [Section 58(d) of TPA]:

In a usufructuary mortgage, the mortgagee is given possession and repays themselves from the property's rent and profits until the dues are cleared. The mortgagor isn't personally liable, and foreclosure or sale remedies are not open to the mortgagee. Possession is essential, and there is no fixed repayment time.

4. English Mortgage [Section 58(e) of TPA]:

An English mortgage involves the mortgagor binding themselves to repay the mortgage money by a certain date. The mortgaged property is transferred absolutely to the mortgagee but subject to the proviso that it will be reconveyed upon full repayment. In this type, the mortgagor usually undertakes personal liability for the debt.

5. Equitable Mortgage [Section 58(f) of TPA]:

An equitable mortgage, also known as a mortgage by deposit of title deed, occurs when the debtor delivers title deeds to the creditor as security. No formalities are strictly required, and it is created by the delivery of title deeds to secure a debt. It is recognized as valid even if not in writing.

6. Anomalous Mortgage [Section 58(g) of TPA]:

An anomalous mortgage is a composite mortgage formed by a combination of two or more primary types of mortgages. The terms of the instrument govern the rights of the parties. For instance, a mortgage with possession containing a covenant to pay the principal and interest or a combination of a simple and usufructuary mortgage where both possession and interest are transferred.