by Deal Acres 
Mortgages are a sort of loan that can be used to buy or keep up a house, land, or another piece of real estate. The borrower agrees to make periodic payments to the lender, usually in the form of a series of regular installments that are split into principal and interest. The property then acts as security for the loan.
What is a Mortgage loan?
A mortgage loan is a kind of house loan in which the lender gives a loan against the property itself. If the borrower defaults on the loan or otherwise violates the terms and conditions, the lender has the right to buy and sell the property.
A few significant pointers related to Mortgage loan have been given below:
- In the case of a mortgage, both the borrowers and the lender are uncertain about its profit/loss. The lender is not sure if the borrower will be able to pay the sum amount back or not. And if the borrower can’t pay back then, he/she will be at a complete loss for the assets.
- In case if the borrower doesn’t pay back, then the lender has full right over the mortgaged product
Let us now take a look at the benefits of taking this mortgage loan.
- While you use the loan funds to meet your needs, you remain the legal owner of your property.
- Mortgage loans are simple to obtain because they are secured loans.
- The interest rate on a mortgage loan is substantially lower than the interest rate on a personal loan.
- You obtain payback terms that are flexible.
- There are no restrictions on how you can use the money.
However, there are several forms of mortgages. It’s also crucial to understand the different types of mortgages with their meaning.
This will assist you in making the best decision on which type of mortgage to choose which to not.
6 types of Mortgages are available in India
1. Simple Mortgage
It is a type of mortgage loan in which the interest is calculated on a daily basis, as opposed to other mortgages in which the interest is calculated monthly or is fixed until the end of the term. A daily interest charge is computed by dividing the interest rate by 365 days and then dividing the outstanding mortgage debt by the daily interest charge. In a simple interest mortgage calculation, the total number of days counted is higher than in a typical mortgage calculation. The interest paid on this loan is usually a little more than on other mortgages.
2. English Mortgage
The mortgagor agrees to return the mortgage money by a specific date, after which the property is transferred to the mortgagee. The mortgagee, on the other hand, pledges to return the property to the mortgagor after the mortgage money is paid according to the terms and conditions.
3. Fixed-rate Mortgage
It is a type of mortgage with a set interest rate. It’s a common loan with variable interest rates that fluctuate over time. Throughout the period of the loan, the interest rate remains constant. A fixed-rate mortgage is commonly used to finance residential or commercial property.
4. Usufructuary Mortgage
The mortgagor transfers the mortgaged property’s rights to the mortgage. It retains custody of the property until the mortgage is paid off. The mortgagor is entitled to the rentals and profits generated by the property. To put it another way, the mortgagor has the right to sell the property to the loan’s lender. This allows the mortgagor to earn an income that can be changed based on the mortgage’s principal and interest.
5. Mortgage by Conditional sale
When the mortgagor sells the mortgaged property on the condition that the sale becomes absolute if the mortgage money is not paid on a certain date, or if the sale becomes void if the payment is made, or if the buyer transfers the property to the seller if the payment is made, the transaction is known as a mortgage by conditional sale, and the mortgagee is known as a mortgagee by conditional sale.
This form of mortgage allowed them to pay off both the principal and the interest while keeping their conscience free.
6. Mortgage secured by the deposit of title deeds
When a person in any of the following towns, namely Calcutta, Madras, and Bombay, and any other town that the State Government concerned may specify in this regard by notification in the Official Gazette, delivers to a creditor or his agent documents of title to immovable property with the intent to create a security thereon, the transaction is known as a mortgage by deposit of title deeds.
This type of mortgage is known as an ‘equitable mortgage’ in English law, as opposed to a ‘legal mortgage,’ because it only requires the deposit of a title document without any other formalities. The legislature’s purpose in permitting such a mortgage is to provide assistance to the business community in situations where funds must be raised fast before the opportunity to execute a mortgage deed becomes available.
As a result, this sort of mortgage loan does not require any writing and is unaffected by the Law of Registration because it is an oral transaction.
So these are the 6 types of mortgages that prevail in India and if you are also the one who is dreaming of buying your own home, then do consider these types of mortgages and choose the best suited to your needs.
FAQs
A mortgage is a kind of house loan in which the lender gives a loan against the property itself. If the borrower defaults on the loan or otherwise violates the terms and conditions, the lender has the right to buy and sell the property.
It is a type of mortgage loan in which the interest is calculated on a daily basis, as opposed to other mortgages in which the interest is calculated monthly or is fixed until the end of the term. A daily interest charge is computed by dividing the interest rate by 365 days and then dividing the outstanding mortgage debt by the daily interest charge. In a simple interest mortgage calculation, the total number of days counted is higher than in a typical mortgage calculation. The interest paid on this loan is usually a little more than on other mortgages.
The mortgagor agrees to return the mortgage money by a specific date, after which the property is transferred to the mortgagee. The mortgagee, on the other hand, pledges to return the property to the mortgagor after the mortgage money is paid according to the terms and conditions.
It is a type of mortgage with a set interest rate. It’s a common loan with variable interest rates that fluctuate over time. Throughout the period of the loan, the interest rate remains constant. A fixed-rate mortgage is commonly used to finance residential or commercial property.
The mortgagor transfers the mortgaged property’s rights to the mortgage. It retains custody of the property until the mortgage is paid off. The mortgagor is entitled to the rentals and profits generated by the property. To put it another way, the mortgagor has the right to sell the property to the loan’s lender. This allows the mortgagor to earn an income that can be changed based on the mortgage’s principal and interest.
When the mortgagor sells the mortgaged property on the condition that the sale becomes absolute if the mortgage money is not paid on a certain date, or if the sale becomes void if the payment is made, or if the buyer transfers the property to the seller if the payment is made, the transaction is known as a mortgage by conditional sale, and the mortgagee is known as a mortgagee by conditional sale.
This form of mortgage allowed them to pay off both the principal and the interest while keeping their conscience free.
