Mortgage deed

Understand the key elements and significance of mortgage deeds.
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Mortgage deed
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4 mins
24th July 2023

What is a mortgage deed

Mortgage deeds are legal documents that outline the terms of a loan agreement between a borrower and a lender. They ensure loan repayment and provide the lender with the legal right to repossess the property if the borrower fails to meet repayment obligations. Additionally, the mortgage deed gives the lender the authority to foreclose on the property in case of default.

What is a mortgage

Before looking into the specifics of a mortgage deed, let us understand the concept of a mortgage. A mortgage is a legal agreement between a borrower and a lender, where the borrower pledges their property as collateral for a loan. This property can be residential or commercial. The lender has the legal right to take possession of the property if the borrower fails to repay the loan.

Types of mortgage deeds

There are various types of mortgage deeds based on the nature of the loan and legal requirements. Some common types include:

1. Simple mortgage deed:

Here the borrower can keep possession of the pledged property. In case of default, the lender has the right to sell the property through a legal process to recover the outstanding loan.

2. Usufructuary mortgage deed:

In this type, the borrower transfers the possession of the property to the lender. The lender can collect the income generated from the property, such as rent, to recover the loan amount.

3. English mortgage deed:

This mortgage involves the transfer of the property's ownership to the lender as security for the loan. Upon full repayment, the lender transfers the property back to the borrower.

4. Equitable mortgage deed:

Here, the borrower deposits the property's title deeds or documents with the lender as security for the loan. The lender does not take physical possession of the property but has the right to sell it in case of default.

When is the mortgage deed required

A mortgage deed is required when a borrower pledges their property as collateral to secure a loan against property. This legally binding document outlines the terms and conditions of the mortgage and the rights and obligations of the involved parties.

The mortgage deed is made at the time of availing the loan. It must be registered with the relevant government authority, as per the applicable laws. Registration adds legal validity to the deed and helps avoid disputes in the future.

Essential elements of a mortgage deed

A mortgage deed should contain the following essential elements:

  1. Names and details: The mortgage deed must mention the names and addresses of both the borrower and the lender. It should also identify the property being mortgaged.

  2. Loan amount and interest rate: The deed should specify the sanctioned loan amount and the applicable interest rate.

  3. Repayment terms: It should outline the repayment schedule, including the number of instalments, frequency, and the due dates.

  4. Mortgage conditions: The deed should state the terms and conditions under which the lender can take possession of the property in case of default.

  5. Rights and liabilities: The mortgage deed must detail the rights and liabilities of both the borrower and the lender concerning the mortgage.

  6. Registration and stamp duty: It should include the details of registration and stamp duty paid on the deed, as per the applicable laws.

A mortgage deed is an important document for availing a loan against property in India. By pledging your property as collateral, you can take a loan at competitive interest rates to meet your diverse financial needs.

Currently, we offer Loan Against Property offers an interest rate starting from 9% to 12% per annum. The repayment tenure of 15 years* is very convenient and you can get a loan of Rs. 10.50 crore*. If financial constraints are holding you back, then getting a loan against property can be a nig relief.

Importance of mortgage deed

A mortgage deed holds significant importance in real estate transactions for several reasons:

  1. Lender security: Provides lenders with a legal interest in the property, acting as security for loans.
  2. Collateral value: Real property pledged through the mortgage deed serves as valuable collateral for loans.
  3. Risk mitigation: Helps lenders assess and mitigate risks by evaluating the property's value and condition.
  4. Legal recognition: Legally establishes the lender's lien on the property, allowing for legal action in case of default.
  5. Terms enforcement: Outlines loan terms and conditions, providing a legal basis for enforcement in case of default.
  6. Ownership transfer: Facilitates the legal transfer of ownership from borrower to lender in the event of foreclosure.
  7. Borrower protection: Establishes clear terms, providing a legal framework for borrower obligations and consequences of default.
  8. Marketability of title: Recorded in public records, contributing to the property's title marketability.
  9. Legal recognition: Holds legal weight, ensuring clear property transactions and protecting the rights of both parties.
  10. Facilitating homeownership: Enables individuals to secure financing for homeownership, promoting real estate transactions.

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

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Frequently asked questions

What are mortgage documents?

Mortgage documents are a collection of legal papers and agreements that are part of the process of obtaining a mortgage loan for real estate. These documents are crucial in defining the terms and conditions of the mortgage, outlining the rights and responsibilities of both the borrower and the lender.

What is the difference between a lease deed and a mortgage deed?

A lease deed establishes a rental agreement, transferring the right to use a property from the owner to the tenant for a specified period. In contrast, a mortgage deed is a document used in a mortgage transaction, where the property owner pledges the property as collateral to secure a loan. The mortgage deed does not transfer ownership but creates a security interest in the property for the lender. The key differences lie in their purposes, the transfer of interest, termination conditions, and the rights of the parties involved.

What is the deed of mortgage with possession?

A Deed of Mortgage with Possession is a legal document that formalises an arrangement where the borrower (mortgagor) grants possession of the mortgaged property to the lender (mortgagee) as security for a loan. This document is used in mortgage transactions, and it provides the lender with the right to take physical possession of the property in the event of default by the borrower.

What is the process of executing a mortgage deed?

The process involves drafting the mortgage deed, reviewing its terms, obtaining signatures from both parties, registering the deed with the relevant government authority, and ensuring legal formalities are fulfilled for validity.

How does a mortgage deed protect the lender?

A mortgage deed legally secures the lender's interest by establishing ownership rights over the property as collateral. It allows the lender to repossess or foreclose on the property if the borrower defaults on repayment.

Can a mortgage deed be amended or cancelled after signing?

Amending or cancelling a mortgage deed after signing is possible but requires mutual consent from both parties and legal approval. Changes must adhere to applicable laws and registration processes to remain valid.

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