Introduction
The mortgage types discussed (e.g., simple mortgage, mortgage by conditional sale, etc.) are defined in Section 58 of the Transfer of Property Act, 1882. This section outlines the legal framework for different kinds of mortgages in India, specifying their characteristics and legal implications.
For example:
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Simple Mortgage: Defined in Section 58(b).
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Mortgage by Conditional Sale: Defined in Section 58(c).
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Usufructuary Mortgage: Defined in Section 58(d).
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English Mortgage: Defined in Section 58(e).
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Mortgage by Deposit of Title-Deeds: Defined in Section 58(f).
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Anomalous Mortgage: Defined in Section 58(g).
These definitions help clarify the rights and obligations of borrowers and lenders under Indian property law.
Types of Mortgages Explained in Simple Terms with Examples
Here’s a breakdown of the mortgage types mentioned in the Transfer of Property Act, 1882, explained in plain language:
1. Simple Mortgage
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What It Is: A basic loan where you (the borrower) keep possession of your property but promise to repay the lender. If you default, the lender can sell the property to recover the money.
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Example:
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You take a ₹10 lakh loan from a bank to buy a house. You keep living in the house, but if you stop repaying, the bank can sell it to recover the loan amount.
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2. Mortgage by Conditional Sale
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What It Is: A “fake sale” where the property is transferred to the lender, but if you repay the loan, the sale is void (canceled). If you default, the lender keeps the property.
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Example:
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You “sell” your car to a lender for ₹5 lakh (the loan amount). If you repay the loan, the lender returns the car. If you default, they keep it.
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3. Usufructuary Mortgage
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What It Is: You give the lender possession of your property, and they collect its income (e.g., rent, crops) to pay interest or the loan amount.
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Example:
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You mortgage your farmland to a lender. They farm the land and use the crop profits to pay your loan interest or repay the principal. You get the land back once the loan is cleared.
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4. English Mortgage
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What It Is: You transfer the property to the lender absolutely (like a real sale), but they must return it if you repay the loan.
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Example:
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You transfer your house to a bank for a ₹20 lakh loan. The bank owns the house on paper, but if you repay the loan, they transfer it back to you. If you default, they keep the house.
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5. Mortgage by Deposit of Title-Deeds
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What It Is: Common in cities like Mumbai, Delhi, or Kolkata. You give the lender your property documents as security. If you default, they can sell the property.
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Example:
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A shop owner gives their property papers to a moneylender for a loan. If they fail to repay, the lender uses the documents to sell the shop.
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6. Anomalous Mortgage
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What It Is: Any mortgage that doesn’t fit the above categories. It’s a mix of features from different mortgage types.
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Example:
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You mortgage a house to a lender, give them partial possession, and agree that they can keep some rent income while you retain other rights. This hybrid arrangement doesn’t fit neatly into simple, usufructuary, or other categories.
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Key Differences
| Mortgage Type | Possession of Property | Income from Property | If You Default |
|---|---|---|---|
| Simple | You keep it | You keep it | Lender sells the property |
| Conditional Sale | Lender keeps it (on paper) | Lender keeps it | Lender keeps the property permanently |
| Usufructuary | Lender keeps it | Lender uses income | You get the property back after repayment |
| English | Lender owns it | Lender owns it | Lender keeps the property if you default |
| Deposit of Title-Deeds | You keep it | You keep it | Lender sells the property using documents |
| Anomalous | Varies | Varies | Depends on the specific agreement |
Why These Types Matter
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Borrower’s Rights: Some mortgages let you keep the property; others transfer ownership temporarily or permanently.
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Lender’s Security: Lenders have different ways to recover money (e.g., selling the property, using its income).
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Legal Clarity: Courts use these definitions to resolve disputes (e.g., who owns the property if a borrower defaults).
In simple terms, mortgages are agreements where your property acts as security for a loan, but the rules vary based on the type of mortgage.
