Mortgage

Introduction

A mortgage is a common method used to secure a loan by using property as security. It does not transfer full ownership but creates a legal right in favour of the lender. The law relating to mortgage is mainly governed by Section 58 of the Transfer of Property Act, 1882.

Meaning / Definition

A mortgage is the transfer of an interest in specific immovable property for the purpose of securing:

• Payment of a loan (money borrowed),
• An existing or future debt, or
• Performance of an obligation (duty) that may lead to payment of money.

Key terms:

• Mortgagor: Person who transfers the interest (borrower)
• Mortgagee: Person who lends money (lender)
• Mortgage property: Property given as security

Modes or Types

Transfer of Interest

• Only a limited right in the property is transferred.
• Ownership remains with the mortgagor.
• The mortgagee gets a legal right over the property to secure repayment.
• This right is enforceable against others (right against property, not just person).

Specific Immovable Property

• The property must be clearly identified.
• It should be described in a way that there is no confusion (clear boundaries or details).
• Only immovable property can be mortgaged under this section.

Purpose of Security

• The transfer must be to secure:

  • A loan already given,
  • A loan to be given in future,
  • An existing debt, or
  • A contractual obligation (duty) that may result in payment of money

• “Pecuniary liability” means a legal duty to pay money (for example, damages).

Practical Example

A needs money for his daughter’s marriage. He borrows money from B and gives his house documents as security.

Here:

• A is the mortgagor,
• B is the mortgagee,
• The house is the mortgage property.

If A fails to repay the loan, B can enforce his right against the property.

Summary

• Mortgage is transfer of an interest in immovable property as security
• Ownership remains with the mortgagor
• Mortgagee gets a legal right over the property
• Property must be specific and clearly identifiable
• Purpose is to secure loan, debt, or obligation
• Applies only to immovable property
• Creates a right against the property (not full ownership)