If you are planning to buy a property or take out a mortgage, it is important to understand the different types of mortgages available to you. Two common types of mortgages are registered and equitable mortgages. While both offer a way to secure a loan against a property, they differ in terms of legal ownership, priority, and other factors. In this article, we will explore the meaning of registered and equitable mortgages, the key differences between the two, and how to choose the right one for your needs.
See also: What is mortgage?
What is a registered mortgage?
A registered mortgage is a legal agreement between a borrower and a lender that allows the lender to secure a loan provided to the borrower for the purpose of purchasing a property. In order to create a charge on the property, the lender must register the mortgage, which is then recorded in the land records as evidence of their rights over the property. The registration process involves submitting the necessary documents, paying the required stamp duty and registration fees.
Registered mortgages have several advantages for both borrowers and lenders. For lenders, it offers legal protection and ensures that they have a right to the property in case of default. For borrowers, it enables them to obtain a loan at a lower interest rate than unsecured loans.
What is an equitable mortgage?
An equitable mortgage is a legal concept in which a borrower pledges the title deeds of a property to a lender as security for a loan. It is a common practice in property transactions, especially in India. Unlike a registered mortgage, there is no need for a mortgage deed or transfer of ownership in an equitable mortgage. This type of mortgage is based on the principle of equity, where the lender has the right to the property if the borrower defaults on the loan.
Equitable mortgages are perfect for borrowers who need immediate funds and cannot afford to wait for the time-consuming process of registering a mortgage. It is a quick and convenient way to secure a loan against a property. Small business owners and individuals looking to finance their home or property purchases often prefer this type of mortgage.
What is the difference between a registered and equitable mortgage?
A registered mortgage is a type of mortgage where the ownership of the property is transferred to the mortgagee as security for the loan. The transfer of ownership is registered with the land registry, and the mortgagee becomes the legal owner of the property until the loan is repaid.
On the other hand, an equitable mortgage is a mortgage where the mortgagee has a beneficial interest in the property, but the legal ownership remains with the mortgagor. An equitable mortgage is created when the mortgagor agrees to transfer the property as security for a loan, but for some reason, the transfer cannot be completed immediately. In such cases, the mortgagee holds an equitable interest in the property until the transfer is completed.
The main difference between the two is that in a registered mortgage, the mortgagee has legal ownership of the property until the loan is repaid, while in an equitable mortgage, the mortgagee has only a beneficial interest in the property. Additionally, a registered mortgage requires the transfer of ownership to be registered with the land registry, while an equitable mortgage does not.
How to choose between registered and equitable mortgage?
When deciding between an equitable mortgage and a registered mortgage, there are important things to consider. Here are some key factors:
Equitable mortgage
- Flexible terms and conditions
- Quick access to the loan
- Less legal protection and fewer remedies if there is a default
Registered mortgage
- Public record for transparency
- Legal protection and clear remedies for both parties
- Low-risk factor for larger loans
Both types have advantages and drawbacks, so it is hard to say which is best. Consider your needs and weigh the pros and cons to make a decision. Don’t forget to consult with a real estate advisor or legal professional to understand the implications of your choice.
FAQs
What is a registered mortgage?
A registered mortgage is a legal agreement between a borrower and a lender that allows the lender to secure a loan provided to the borrower to purchase a property.
What is an equitable mortgage?
An equitable mortgage is a legal concept in which a borrower pledges the title deeds of a property to a lender as security for a loan.
What is the difference between a registered and equitable mortgage?
The main difference between the two is that in a registered mortgage, the mortgagee has legal ownership of the property until the loan is repaid. In contrast, in an equitable mortgage, the mortgagee has only a beneficial interest in the property. Additionally, a registered mortgage requires the transfer of ownership to be registered with the land registry, while an equitable mortgage does not.
What are the advantages of a registered mortgage?
Registered mortgages offer legal protection and ensure that lenders have a right to the property in case of default. For borrowers, it enables them to obtain a loan at a lower interest rate than unsecured loans.
What are the advantages of an equitable mortgage?
Equitable mortgages are perfect for borrowers who need immediate funds and cannot afford to wait for the time-consuming process of registering a mortgage. It is a quick and convenient way to secure a loan against a property.
Which type of mortgage is best for larger loans?
A registered mortgage is a low-risk factor for larger loans as it offers both parties more legal protection and clear remedies.
What happens if a borrower defaults on a registered mortgage?
In case of default, the lender can take legal action to repossess the property and recover the outstanding loan amount.
Can a borrower choose between a registered and equitable mortgage?
Yes, a borrower can choose between a registered and equitable mortgage depending on their needs and circumstances.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
