A legal document that gives a mortgage lender a lien or security interest in a piece of mortgaged property is known a Mortgage deed. There is a participation of two Parties, Mortgage deed is one of the most common forms of Conveyancing, conveyance starts with the names of the parties and it ends with the execution and attestation clauses, which in literal sense means to convey something to another person, and widely used for transfer of movable or immovable property. In case of a Mortgage deed, the mortgaged property may be movable or immovable for the purchase of any Movable or Immovable property/good. For example, if a person A, take out a mortgage loan to purchase a Car, A in this case has to sign a mortgage deed giving the lender a lien on your home. The idea behind creation of a mortgage deed is to give the lender a protection in a legal sense, in case there is default in repayment of the loan on the mortgaged property. The lender may after the expiry of specified time and even the extended time provided (60days) , the lender may use his foreclosure right to sell off the mortgaged property to get his repayment redeemed.
According to the Section 58(a) of the Transfer of Property Act 1882 “A mortgage is the transfer of 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 performance of an engagement which may give rise to a pecuniary liability.”
"The transferor of the property is called the mortgagor , the person to whom the property is transferred, transferee is called the mortgagee, the principal money and interest of which payment is secured for the time being are called the mortgage -money, and the legal instrument by which the transfer is brought into effect is called a mortgage deed."
Essentials of a Valid Mortgage Deed
- Description of deed: The title of the deed to written in Capital letters at the top of the deed, "DEED OF MORTGAGE".
- Parties to the deed: The name of the parties shall be mentioned first, then followed by address, age and occupation
- Date on which it is executed: The last essential is the date on which the deed would legally come into effect.
A mortgage deed transfers title, or at least legal title, of property to the mortgage lender. However, the lender claims no right to do anything with that title other than foreclose on the property. Even then, the lender can only foreclose if there is default on the mortgage repayment.
Types of Mortgage Deed
- Simple Mortgage - In case of a Simple mortgage, the possession of the property which is the subject matter is not transferred from mortgagor to the mortgagee. The circumstances in which the mortgagor fails to repay the loan, the mortgagee has the right to sell the property and recover the loan from the sale amount.
- Mortgage by Conditional Sale - As the name itself suggests, conditional sale, the mortgagor sells the property to the mortgagee on certain conditions, which can be entered and understood between the parties.In such case, the mortgagee is a "mortgagee by conditional sale".
- Usufructuary Mortgage - The possession of the mortgaged property is transferred to the mortgagee. The mortgagee continues to receive the benefits from the property (rent, profit, interest, etc) until the repayment of the loan is achieved. The title of the deed remains with the owner.
- English Mortgage - In this form of mortgage remains bounded to repay the borrowed amount on a date mentioned in the deed. The mortgagor has to transfers the property absolutely to the mortgagee. The transfer in this case is subject to the condition that the mortgagee will retransfer the property on repayment before the agreed date.
- Mortgage by deposit of title of deeds - In such mortgage, the mortgagor proceeds and delivers the title document of the property to the mortgagee with an intention to create a security.
- Anomalous mortgage - is a mixture of various types of mortgages.
Requisites of a Mortgage Deed
- A rooted investigation to prove the ownership of true title upto 60 years, previously.
- Recitals: means a brief description and history of the property, along with the object of the loan—Amount and rate of interest.
- Parties to the deed: the Mortgagor and the mortgagee.
- Operative words: The deed must have words very selective and concise upto the limits and liability and to the extent what procedure is agreed between the parties.
- Possession: The right to take possession of the property, Such a mortgage should contain a clause as to the appointment of a Receiver who may act to be a nominee of the mortgagee.
- Execution and Attestation: Attestation is an essential element to every mortgage deed. The attestation then results in the execution of deed.
- Registration: Registration is compulsory in most mortgage cases, except the mortgage in transfer of title of goods, which doesn’t actually require registration.
- Delivery of title deed: Delivery of deed is essential when registration is concluded; it shall flow from mortgagor to mortgagee.
- Redemption Article 61 of The Limitation Act, 1963, speaks about a suit for redemption which may be brought within 30 years from when the right to redeem accrues essentially with the conditions of agreement. Where the property has been transferred for valuable consideration the period of limitation is 12 years.
Rights of Mortgager
- Right of redemption: The possession of the immovable property goes back to the Mortgager.
- Right to transfer the property: The mortgager can after the redemption of property after the repayment, can transfer property to any third party.
- Right to inspection of documents: The mortgager can inspect the records and documents.
Rights of Mortgagee
- Right to sue for mortgage money: The mortgagee can sure the mortgagor for mortgage money, when there is no repayment, there is some mistake on the part of mortgagee, when the property for unforeseeable is destroy or insufficient then mortgagor could sue.
- Right of Possession: The mortgagor can sue the mortgagee when in case, there is no repayment.
- Right of foreclosure: The mortgagee has a right to stop the mortgagor from claiming back the property and can file a suit in case of default.
- Right to sale: Section 69 of the Transfer of Property Act states that the mortgagee can sell the mortgaged property without even filing a suit and without taking the permission of the Court subject to agreed terms of deed.
Mortgage deed is a transfer of interest in some specific immovable property. It is the mortgagor who has the overall interest in the subjected property. It could be understood that there is the transfer of interest, the property is transferred to the mortgagee, and he gains the right to recover the amount of loan. There must be an existence of immovable property, in the true ownership of the Mortgagor. When an agreement for a mortgage is complete and accomplished, the mortgagor and the mortgagee relationship is exhausted, when there is repayment of loan.