Equitable Mortgage Vs Registered Mortgage
In the case of a mortgage, lenders will give you a loan and keep the original property documents until the entire loan amount is repaid. There are multiple types of mortgages in India. Below we have explained the key aspects and differences of between equitable mortgage and registered mortgage.
Difference between Equitable Mortgage and Registered Mortgage
The key differences between an equitable mortgage and registered mortgage are as follows:
| Equitable Mortgage | Registered Mortgage |
|---|---|
| An equitable mortgage is a common-law concept wherein the borrower pledges a property as collateral without mortgage registration with a government agency. | A registered mortgage is a legal document wherein the charge on the property is created & recorded with a government agency. |
| It is necessary to file 'Title Deed Deposits' and get them recorded with CERSAI to complete the agreement. | The agreement has to be registered with the sub-registrar & any disputes arising from the mortgage will be resolved according to the law. |
| An equitable mortgage doesn’t involve a third party, and the terms & conditions are mutually agreed upon, which results in a much lower cost in reaching an agreement than a registered mortgage. | The government agency is involved and registration is required. |
| You need to pay a stamp duty of just 0.1% to 0.2% of the property’s value. | You have to pay a stamp duty of 5% of the property’s value. |
| No need to go through complex procedures, as the transaction can be done after purchasing the readily available stamp paper. Only stamp duty on the equitable mortgage is needed. | It involves a lengthy process, as you have to visit the sub-registrar's office for the registration process. |
| It is cheaper & less time-consuming. | It is expensive & more time-consuming. |
| Any charge on the mortgaged property is unknown to the general public, so the borrower can be deceived by the lender by illegally disposing of the property during default, resulting in a significant loss. | The information about the charge on the specific immovable property is already available to the general public. Hence, the borrower can’t sell the property by hiding it from the mortgage lender. |
| If you don’t repay the loan, the lender will seize your property & sell it at auction. | If you can’t repay the loan, your property is transferred to the lending bank, which can do anything with the property. |
Understanding the differences between equitable mortgage and registered mortgage will help you opt for the suitable mortgage type. Usually, lenders prefer a registered mortgage as it does not involve any risk. However, if you are an existing customer of the lending institution, and have a good relationship with them, you can also avail of an equitable mortgage.
You can also check Loan against Agri Land
What is the Meaning of Equitable Mortgage?
The following are the BOB Credit Card Offers under different categories.
Equitable mortgage meaning comes from ‘Equitable’ (derived from the word equity), which means the interest of justice. It is a simple contract between a mortgagor and mortgagee (lender and borrower herein). Under this type of mortgage, you borrow funds from the lender and provide the property documents to them.
The ownership documents will remain with the lender until you completely repay the loan. This mortgage is usually offered for a time frame of 15 to 20 years, within which your property documents will remain with the lender.
You can also check Loan Against Property Interest Rates online
Registered Mortgage Meaning
As the name suggests, a registered mortgage meaning the lender registers the mortgage on the property title with a sub-registrar under whose jurisdiction the property is situated. In a registered mortgage, apart from the borrower and the lender, a third party is involved. In this type of mortgage, you have to give the full right of the property to the lender voluntarily.
The ownership of your property remains with the lender, and they can use or dispose of the property in case of default. You will be required to record your property mortgage at the sub-registrar office. The property’s ownership is transferred back to you on repaying the loan in full,.
Equitable Mortgage Charges
An equitable mortgage does not involve a third party. Also, the terms and conditions are mutually agreed upon by the lender and the borrower. These reasons make an equitable mortgage cheaper in reaching the agreement than a registered mortgage. Equitable mortgage charges involve a stamp duty of just 0.1% to 0.2% of the current market value of the property. Sometimes the stamp duty can be as low as 0%.
In conclusion, it is important for borrowers to understand registered equitable mortgages and the difference between both. Registered mortgages have higher fees. However, the ultimate choice between a registered mortgage and an equitable mortgage depends on the specific circumstances of the borrower as well as the lender. If you are confused, it is advised to consult a financial advisor or real estate expert for a better understanding of the pros and cons of both options and determine which mortgage type fits you the best.
You can also check Mortgage Loan Interest Rates
FAQs
An equitable mortgage is a common-law concept wherein the borrower pledges a property as collateral without mortgage registration with a government agency. Whereas a registered mortgage is a legal document wherein the charge on the property is created & recorded with a government agency.
Equitable mortgage is usually offered for a time frame of 15 to 20 years.
Home loans and loans against property are examples of equitable mortgages.
A simple mortgage is a system wherein the borrower’s property is given to the lender to get a loan. Both the parties sign an agreement for the transaction.
With a home equity loan, the borrower avails of a loan when he/she already owns the home and has equity.
An equitable mortgage is a common-law concept wherein the borrower pledges a property as collateral without mortgage registration with a government agency.
Banks usually prefer a registered mortgage over a registered mortgage because there are legal provisions and the risk is lower.
Reshma Rawat is a passionate writer, with a decade of experience in writing for a variety of domains (finance, technology, lifestyle, e-commerce, real estate, etc.). Currently, she is working as Assistant Manager - Content @MyMoneyMantra, and writes blogs & webpages on financial products (loans, credit cards, insurance, financial policies by government, mutual funds, etc.
Abhijeet Singh has comprehensive experience in business writing, content management, SEO, social media and user analytics. Key areas of expertise include stock markets and personal finance.