What is a Mortgage?
A mortgage is defined as the transfer of an interest in a specific piece of real estate for the purpose of guaranteeing the repayment of funds advanced or to be advanced as a loan, the payment of an existing or future debt, or the performance of an agreement that may result in financial liability under Section 58 of the Transfer of Property Act, 1882.
The instrument by which the transfer is affected is known as the mortgage deed. The transferor is known as a mortgagor, the transferee as a mortgagee, and the principal amount and interest for which the payment is currently secured are referred to as the mortgage money.
The following are the three key components of a mortgage: After paying back his debt, the mortgagor can reclaim his ownership of the property he mortgaged. In the event that the obligation is not paid, the mortgagee has the right to sell the property. The mortgagee forfeits any interest he had in the mortgaged property upon full payment of the obligation.
Sub- mortgage
When the mortgagee utilizes the property that is in his possession to obtain a loan for himself, the mortgage takes the form of a sub-mortgage. Until the loan balance is repaid, the mortgaged property is regarded as the mortgagee’s property. Therefore, by adding to the existing mortgage on the property, he can obtain an advance. The mortgagee is granted all the legal privileges that are accorded to mortgagees. Additionally, he is entitled to sue for repayment of the loan. The mortgaged property may also be used as security by him.
Definition of Simple Mortgage
A simple mortgage is done when the mortgagor makes himself accountable to pay the debt without delivering any property to the mortgagee. He either expressly or implicitly implies that the mortgagee may utilize the mortgaged property to recoup the money in the event of non-repayment.
The primary feature of a simple mortgage is that the mortgagee has no legal authority to sell the property without the court’s approval. The mortgagee may ask the court for permission to sell the purchased item or can file a lawsuit to recover the full amount without selling the item.
In other words, no property is given to the mortgagee in a simple mortgage. The mortgagor assumes personal responsibility for the loan or debt’s repayment. The mortgagee cannot liquidate or sell the property without the court’s permission if the mortgagor doesn’t pay the debt if it is not paid in full. To recover money, the mortgagee must ask the court for permission to sell the property. As a result, a money decree may be used to reclaim the funds.
The characteristics of a simple mortgage
No Property Transfer
A simple mortgage does not include the delivery of the property to the mortgagee. The mortgagee can get his money back by asking the court for a money decree.
Personal Liability
Liabilities in relation to the mortgaged property and other liabilities are both possible in the case of a straightforward mortgage. To recoup the funds, the mortgagee has two options: he can either seize the property that is subject to the mortgage or bring a lawsuit against the mortgagor. In the case of a straightforward mortgage, the presence of a personal covenant is crucial.
Adverse Possession
The property can also be mortgaged if a trespasser removes the mortgagor and takes possession of it. The mortgagee’s legal rights are not affected by the transfer of such property. Adverse possession only applies when the mortgagee who is authorized to take possession of the property fails to do so within a reasonable amount of time.
Judicial Precedent
The court ruled in Ram Narayan Singh v. Adhindra Nath, AIR (1916) PC 119 that the mention of some immovable property as security for the loan’s repayment does not relieve the mortgagor of his or her personal obligation to repay the loan with interest. The wording “right to cause the property to be sold” in section 58 (b) of the Transfer of Property Act, 1882 suggest that the power of sale is not to be used by the mortgagee without the participation of the court, the court held in the Kishan Lai v. Ganga Ram (1891) 13 Allahabad 28 case.
Right of Foreclosure
The customary practice of the mortgagee forfeiting the mortgaged property in the case of a payment default is no longer seen as being in accordance with the law. The mortgagee must use his rights in accordance with the Act’s guidelines. This means that the mortgagee is unable to seize or profit from the property. He needs a court order authorizing the sale of the property. The right of foreclosure is provided for in Section 67 of the Transfer of Property Act. Once the balance is due, the mortgagee has the authority, under Section 67, to ask the court to issue a judgment prohibiting the mortgagor from exercising his right of redemption or from selling the property subject to the mortgage.
The type of mortgage affects the right to foreclose as well. Simple mortgages do not give the mortgagee physical ownership of the mortgaged property, hence he is unable to exercise his right to foreclose. The mortgagee’s only options for redress are the sale of the mortgaged property or legal action taken against them personally.
Simple Mortgage Deed & its requirement
A mortgage is a transfer of ownership in a specific piece of real estate used to finance a current or future loan. A mortgage deed is a legal instrument used to transfer a real estate interest from the mortgagor to the mortgagee in order to secure a mortgage loan. The interest that has been transferred to the mortgage holder is attested to by the mortgage deed. It establishes the criteria and terms between the mortgagee and the mortgagor.
When a person borrows money from another person or business and has to transfer ownership of a property to that person, a mortgage deed is necessary. The obligations, terms, and conditions between the mortgagor and the mortgagee are contained in the mortgage document, which is crucial. It establishes the parties to the deed, the lender’s rights, the scope of the interest and title in the property, the loan amount and interest rate, and, of course, provides proof that the lender/mortgagee has acquired an interest in the property.
Conclusion
A personal covenant is required in the case of a simple mortgage. The mortgaged property serves as security for the mortgage, and the mortgagor accepts personal responsibility for loan repayment. The mortgaged property may be attached if the mortgagor is unable to make loan payments. In this case, getting the court’s approval is necessary before selling the property.
References
Definition of Simple Mortgage https://www.lawctopus.com/academike/simple-mortgage/
Features of a simple mortgage https://blog.ipleaders.in/analysis-concept-simple-mortgage/
Simple Mortgage Deed https://lawrato.com/legal-documents/contracts-legal-forms/simple-mortgage-deed-41
Judicial Precedents https://thefactfactor.com/facts/law/civil_law/topa/types-of-mortgages/2655/
Right of Foreclosure https://www.lawyersclubindia.com/articles/right-of-foreclosure-under-the-transfer-of-property-act-an-analysis-14648.asp
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