Introduction
There are several types of mortgage loan rules and regulations defining the scope of mortgages with the mortgage laws in India; and a borrower is expected to be equipped with the basic knowledge of types of mortgages to negotiate his deals better with the lender.
A mortgage loan is a type of secured loan offered by lenders to investors against the property, land, or any form of real estate purchased on the loan. The collateral pledged in this type of loan is the asset itself and the borrower is expected to repay the loan principal and interest over the set period of time in a series of monthly installments.
However, if the borrower may fail to do so or is unable to meet the contractual demands, the lender is legally liable to fall heir to the security asset and may hold ownership to sell the defaulter’s asset to recoup himself.
Therefore, in this blog, we are going to discuss the mortgage laws in India, their nature, and their scope.
What Is Transfer Of Property Act Under Section 58(a)
Mortgage laws in India are primarily defined by TPA, short for the Transfer of Property Act. Commenced first in 1882, TPA states that a property or an immovable asset can be transferred through lease, sale, exchange, gift, or actionable claims, therefore does not cover inheritance, insolvency, forfeiture, or any other succession of the property. I.e,
1. The transfer must be of immovable property, however not limited. Some sections may deal with movable properties, subject to conditions.
2. Act prohibits any type of oral or verbal agreements. In absence of a written agreement, the transaction will be nullified.
3. Individual is not allowed to transfer an asset or property he wishes to inherit in the future.
4. Non-transferable properties or lent properties cannot obtain the right of occupancy or transfer.
5. Sale, lease, exchange, mortgage, actionable claim, and gift are the only valid types of property transfers and are restricted as such. So on and so forth.
Who is eligible to transfer their property under TPA?
‘Every person competent to contract and entitled to the transferable property, or authorized to dispose of transferable property not his own, is competent to transfer such property, either wholly or in part and either absolutely or conditionally, in the circumstances, to the extent and in the manner, allowed and prescribed by any law for the time being in force,’ section 7 of TPA reads.
As stated above most banks or financial institutions follow certain mortgage loan rules and regulations for an individual to enter into a contract. However, individuals above 18 years of age with the right conditions to fit the contract can apply for the transfer and are considered eligible in accordance with the mortgage laws in India.
For more information, learn here.
What Are The Types Of Mortgage In India
TPA classifies six other types of mortgages under its wing, described as follows.
Simple Mortgage
In a typical type of mortgage, the borrower pledges their home as collateral for the loan. The property does not change hands, but the lender has the right to foreclose if the borrower fails to make payments.
Conditional Mortgage
Conditional mortgage or mortgage by conditional sale is a type of mortgage situation in which if the mortgagee defaults on his payment by the due date, the sale will become absolute. I.e the sale made will be invalid or nullified.
Usufructuary Mortgage
This type of mortgage loan is known as a collateralized loan. With this type of loan, the asset that is used as collateral is transferred to the lender. The lender then has the authority to use the asset for a profit. This profit can then be used to offset the principal and interest amount of the loan.
English Mortgage
n this loan arrangement, the ownership of the mortgaged property is transferred to the lender. Should the buyer default on repayment, the lender is then entitled to take possession of the property. Although possession rights remain with the lender, the borrower is allowed to occupy or rent the property.
Deposit of Title Deed
Also known as an equitable mortgage, available only in selected states of India, is a type in which the deposited document of the title to a creditor or an agent by a debtor without any written or legal formalities. Available in Madras, Bombay, and Calcutta, the transfer is made without registration or stamp duties.
Anomalous Mortgage
Anomalous mortgage can be stated as a custom-made or personalized mortgage system in which the conditions may fit two or more of the six types mentioned above. That is, the terms and circumstances will include the rules of the combined types in the contract.
Final Word
Scope of the mortgage is limited to LTV when the value of the loan borrowed is greater than the value of the mortgagee property, hence the law ensures that the monetary demands are appraised in trade for an immovable asset. I.e the investor attests to the lender that he will not sell or transfer his property until the loan borrowed is settled in its entirety. Therefore, mortgage loans serve a greater purpose for those who know their rights and know how to negotiate better.
Now that you have the basic learning of mortgage laws in India, types of mortgages, and mortgage loan rules and regulations of what rules apply and what don’t, are you ready for your next big investment?
If you are still not sure how, give us a call at Loanz360 and schedule a meeting with our representative, who will take you through the process of buying and financing a loan, along with comparing the market rates and finding the best option that fits your dream in your pocket.
