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MORTGAGE AGREEMENT

MORTGAGE AGREEMENT

The mortgage is a type of loan for which the property or the real estate is used as the collateral. When a person gets a mortgage, the lender of the person shall take the lien against the property. Which means they can take possession of the property, if the person defaults to pay the loan the lender can use the property to compensate for his loss. Mortgage is considered as the relatively safe loan for the lenders to secure him from the loss if incase they fail to pay the money in the mentioned period.

In India, Mortgage which comes under Section 58 to 104 of the Transfer of property Act, 1882.

The person who mortgages his property as the security for the loan is  said to be the “Mortgagor”. And the person to whom the property is mortgaged is “Mortgage”.

WHAT IS MORTGAGE AGREEMENT ?

Mortgage agreement is the legal agreement between the borrower and the lender. That agreement which outlines the terms and conditions about the Mortgage. The agreement contains the details of the property, principal loan amount, interest , repayment  and penalties and other legal clauses regarding the mortgage. The deed or the agreement which grants the legal rights to the lender should have the right to sell or use the property, if the mortgage loan is defaulted by the borrower in the mentioned period of time.

WHY MORTGAGE DEED IS ESSENTIALLY REQUIRED

  • A mortgage deed is essentially required when a property is served as the security for a loan.
  • It avoids the potential disputes and the misunderstandings between the lender and the borrower. 
  • The Mortgage deed saves the lender from the loss.
  • It is the legal document which does not allow the parties to involve the fraudulent transactions and activities.
  • The agreement protects the promissory note of the parties. 
  • The mortgage deed helps to determine the loan and interest of the borrower.
  • The deed acts as the evidence in the court if any disputes arose between the parties. 
  • If the money due is paid, the mortgagee should release the lien on the property.
  • In the event of default, the mortgagee shall take possession and recover the loan due by way of sale.

These are the certain reasons that the mortgage agreement is essentially required.

TYPES OF MORTGAGE DEEDS :

There are two types of mortgage deeds mentioned under the Transfer of property Act, 1882.

Simple mortgage deed [Section 58 (b)]

The simple mortgage deed is mentioned under Section 58 (b) of the transfer of property act. The simple mortgage deed which denotes the deed should follow the basic terms and conditions of the mortgages, where the possession of the property is not necessary.

Mortgage by deposit [Section 58(f)]

It is an equitable mortgage, which does not require any writing legal formalities and it is not affected by the registration. According to section 58(f) of the Act. This type of mortgage is applied to the notified towns or the cities which are specified by the state government in the official gazette. Those can deliver the title deeds of the immovable property to the banks with the interest to secure the Mortgage. In this mortgage, the possession of the property is necessary for the mortgage agreement but it varies from every local law. It is a convenient form of mortgage and the cost effective way of protecting the property of the individual.

PARTIES INVOLVED IN THE MORTGAGE AGREEMENT :

There are three parties involved in the mortgage agreement, those are : 

Lender or Mortgagee :

Any financial institution or bank and any person who provides the loan to the borrower on a guarantee for the particular time period.

Borrower or Mortgagor :

The company or individual who has obtained the money from the lender for their own use. They are liable to repay the money which the parties agreed in the mentioned time period.  

Co-borrower or Surety :

The company or individual who borrows the money with the borrower as a supporter. The co-borrower is also called as the surety who is also responsible for repaying the money.

ESSENTIAL ELEMENTS OF THE MORTGAGE DEED :

There are certain essential elements which constitutes the valid mortgage deed or agreement, those are ; 

1. Parties involved :

The mortgage agreement should mainly contain the details of the parties who were involved in the agreement. In this clause it should be clearly mentioned that the party who is mortgagor, mortgagee and the surety. All the details about the parties involved in the agreement should be clearly mentioned in the deed. (Parties name, address and identifications, point of contract). 

2. Deed Description :

The agreement or the deed should contain the detailed description about the Nature of the agreement, purposes, enforcement, and it should also be included with the other relevant details about the nature of the mortgage. Also the deed should detailly mentioned the date of enforcement and it also covers the termination clause of the agreement. 

3. Property details :

The mortgage agreement must focus on the mortgaged property which includes the value of the mortgage property, property description, size of the property and sketch plan about the immovable property address and other description about such property should be detailly mentioned in the mortgagee agreement. Also ensures that the mortgage property value must be not less than the actual value of the loan. If the borrower fails to pay the amount of such due dates. The lender should take over the possession of such property and compensate him from the loss or default by the borrower. So the details of the property are essential for the deed.

4. Term of Repayment :

The agreement should contain the covenants for the repayment of the loans, which include the principal amount, mode of payment, interest per month, and tenure for the repayment. This clause also deals with the consequences of the non repayment of the loan on such due dates. The detailed view of the loan instalments and the repayment details should be clearly mentioned in this clause.

5. Habendum :

In this clause the borrower and the lender should clearly mention the details of the interest of the loan based on the instalments. The interest rate should be reasonable and legal. Otherwise the agreement should not be validated in front of the court and it is not accepted in case of the dispute. The amount of interest should be fair and which is payable by the borrower other than the principal amount. This clause protects the parties from fraudulent activities and protects the mortgage property of the borrower. 

6. Mortgage clause :

This clause determines the type of mortgage which the parties agreed to enter in an agreement. It also determines the rights and the duties of the both parties, also it depends on the type of mortgage of the property.  

  • In a simple mortgage the possession of the property is not necessary.
  • But in the English mortgage, the mortgage has the absolute right over the possession of the property. 

The clause which also focuses on the rights and the duties of the both parties, It also included that the lender should not lease the property of the borrower in the period of mortgage without taking prior consent from the borrower. The lender should not involve the fraudulent activity against the borrower and not charge high interest from him. And all the other conditions are included in this clause. 

7. Insolvency :

It is one of the important clauses that the borrower is insolvent and defaults to pay the loans and instalments. The lender should take possession of the  mortgaged property. To compensate him from the losses.

8. Redemption clause :

The redemption clause which is an essential element for the mortgage deed. This deals with the essential attributes of the transaction of the mortgage and the statutory right under Section 60 of the transfer of property act. It also specifies the tenure of the mortgage deed and the due dates for the settlement of the property. 

ESSENTIAL FOR THE MORTGAGE DEED :

There are certain documents are essential for the mortgage deed or the agreement :

  • Proof of the parties (PAN, Aadhar card, passport)
  • Details or the parent deed of the mortgaged property.
  • Bank pass book
  • Photocopies of the parties.
  • Loan agreement 
  • Witness 
  • Promissory note 
  • Surety for the loan

These are the certain essentials needed for the mortgage deed.

ADVANTAGES OF THE MORTGAGE DEED :

There are certain advantages of the mortgage agreement are there, 

  • The mortgage deed which helps the individuals to borrow high amounts when compared to the unsecured loans.
  • Mortgage agreement offers low interest rate to the borrower as they pledge their property as a guarantee.
  • The mortgage loan provides the borrower with a long repayment period, which minimises the burden of the monthly payment.
  • The borrower gets the money from the lender by mortgaging the property, here if the borrower fails to repay the money, the lender can legally take the property which reduces the risk of losing money.

These are the advantages of the mortgage deed.

REGISTRATION OF THE MORTGAGE DEED :

The registration is one of the important processes which gives the power to legal validation of such deeds. In this case, the mortgage by the delivery of the title deed, the registration procedure is not required.

  • The mortgage deed must be signed by both the lender and the borrower. 
  • The terms and conditions should be accepted by both parties before signing the mortgage deed.
  • At Least two witnesses should attest the mortgage deed.
  • Mortgaged property details should be attached and also the surety.  
  • The stamp duty value is paid accordingly orelse the document should not be enforceable by the law.

The mortgage deed is enforceable when the borrower fails to repay the dues in the said dates. The lender shall have the power to exercise with the deed.

FAQ

FAQ ON MORTGAGE DEED :

1. WHAT IS MORTGAGE ?

The mortgage is a type of loan for which the property or the real estate is used as the collateral. When a person gets a mortgage, the lender of the person shall take the lien against the property. 

2. WHO IS MORTGAGOR AND MORTGAGEE ?

  • The person who mortgages his property as the security for the loan is  said to be the “Mortgagor”. And the person to whom the property is mortgaged is “Mortgage”.

3. WHAT IS HABENDUM ?

In this clause the borrower and the lender should clearly mention the details of the interest of the loan based on the instalments. The interest rate should be reasonable and legal. Otherwise the agreement should not be validated in front of the court and it is not accepted in case of the dispute. 

4. WHAT ARE THE TYPES OF MORTGAGE DEEDS :

There are two types of mortgage deeds mentioned under the Transfer of property Act, 1882.

  • Simple mortgage deed [Section 58 (b)]
  • Mortgage by deposit [Section 58(f)]
5. IS THE REGISTRATION OF THE MORTGAGE DEED IS ESSENTIAL ?

The registration is one of the important processes which gives the power to legal validation of such deeds. In this case, the mortgage by the delivery of the title deed, the registration procedure is not required.

MORTGAGE AGREEMENT
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