Different Types of Mortgage
Different Types of Mortgages in India
1. Introduction
A mortgage is a legal device under which a borrower (mortgagor) transfers an interest in immovable property to a lender (mortgagee) as security for a loan.
Governed primarily by the Transfer of Property Act, 1882 (Sections 58–104).
Mortgages are classified based on nature of transfer, mode of interest, and rights of parties.
2. Types of Mortgages under Indian Law
A. Simple Mortgage (Section 58, TPA)
Definition:
Mortgagor binds themselves personally to repay the debt.
Transfers ownership only to the extent necessary for securing debt, but does not deliver possession.
Key Features:
Mortgagor executes a deed.
Mortgagee has right to file suit for recovery.
No foreclosure without decree.
Case: K.K. Verma v. Union Bank (1974)
Mortgagee can enforce repayment but cannot take possession without court order.
B. Mortgage by Conditional Sale (Section 59, TPA)
Definition:
Mortgagor transfers ownership of property conditionally: if debt is not repaid, mortgagee can retain ownership.
Key Feature:
Deemed absolute sale on default, otherwise reconveyed.
Case: Krishan Lal v. S.P. Agarwal (1961)
Court held: conditional sale is a valid mode of mortgage; mortgagee can retain property on default.
C. Usufructuary Mortgage (Section 60, TPA)
Definition:
Mortgagor delivers possession of the property to mortgagee.
Mortgagee is entitled to profits or rents from the property until debt is repaid.
Key Feature:
Mortgagee can recover loan from property income, not personal liability.
Case: B.C. Goyal v. H.N. Chadha (1980)
Mortgagee can retain possession and apply rents/profits against the loan.
D. English Mortgage (Section 61, TPA)
Definition:
Mortgagor transfers ownership absolutely, but with a condition to redeem on a fixed date.
Key Feature:
Mortgagee has full ownership rights until repayment.
Case: Shah v. Union Bank (1982)
Absolute transfer with redemption clause recognized; mortgagee entitled to enforce on maturity.
E. Mortgage by Deposit of Title Deeds (Equitable Mortgage) (Section 58(f), TPA)
Definition:
Mortgagor deposits title deeds with lender, without executing formal mortgage deed.
Creates equitable charge in favour of mortgagee.
Key Feature:
Rights enforceable through court; common in banks for home loans.
Case: ICICI Bank v. Ramesh Chand (2002)
Bank entitled to sale of property or injunction under equitable mortgage principles.
F. Mortgage by Will or Testamentary Mortgage
Definition:
Mortgage created through a Will, effective after mortgagor’s death.
Key Feature:
Rights are enforceable after testator’s death; redemption possible by heirs.
Case: Amrit Narayan v. Gaya Singh (1917)
Mortgage by Will enforceable post death of testator.
G. Simple Mortgage with Possession (Hybrid)
Definition:
Simple mortgage, but mortgagee allowed possession until debt repayment.
Key Feature:
Combines features of simple and usufructuary mortgages.
3. Key Distinctions
| Type | Ownership | Possession | Source of Recovery | Redemption |
|---|---|---|---|---|
| Simple Mortgage | Mortgagor | Retains | Personal liability | Court suit |
| Mortgage by Conditional Sale | Mortgagee (conditional) | Retains | Sale on default | Re-convey if paid |
| Usufructuary Mortgage | Mortgagor | Delivered to mortgagee | Income/profits | Mortgagee must return after payment |
| English Mortgage | Mortgagee (absolute) | Mortgagor or mortgagee | Full property | By paying debt on due date |
| Equitable Mortgage | Mortgagor | May retain | Court enforced | By repaying loan |
| Testamentary Mortgage | Mortgagor/deceased | N/A until death | Post-death | By heirs |
4. Practical Importance in India
Banks and Financial Institutions use equitable mortgages (deposit of title deeds) for housing and commercial loans.
Developers and builders often prefer usufructuary mortgages for land development finance.
English mortgages common in commercial lending where fixed repayment dates are agreed.
5. Conclusion (Exam Style)
Indian law recognizes several types of mortgages under the Transfer of Property Act, 1882. These include simple mortgage, mortgage by conditional sale, usufructuary mortgage, English mortgage, and equitable mortgage. Each type defines the extent of ownership, possession, and rights of the mortgagee. Leading cases like K.K. Verma v. Union Bank (1974), Krishan Lal v. S.P. Agarwal (1961), and B.C. Goyal v. H.N. Chadha (1980) illustrate the rights and remedies available to mortgagees and the obligations of mortgagors, ensuring a balance between security for lenders and protection of mortgagor’s rights.
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