Types of Mortgage

Introduction

The Transfer of Property Act, 1882 recognises different types of mortgages based on the nature of transfer, possession, and rights of the parties. Each type has specific features and legal consequences. Understanding these types is important for exams and practical application.

Meaning / Definition

A mortgage can take different forms depending on how the interest in property is transferred and what rights are given to the lender (mortgagee). Section 58 classifies mortgages into six main types.

Modes or Types

Simple Mortgage

• There is a personal promise by the mortgagor to repay the loan.
• The property is not given in possession to the mortgagee.
• The mortgagee has the right to get the property sold through the court.
• The mortgagee can:
  • Sue for money, or
  • Seek sale of property, or
  • Do both in one suit.

Mortgage by Conditional Sale

• The property is apparently (on the face of it) sold to the mortgagee.
• There is a condition that:
  • On repayment, the sale becomes void or property is returned, or
  • On default, the sale becomes absolute.
• The condition must be in the same document.

Usufructuary Mortgage

• Possession of property is given to the mortgagee.
• The mortgagee takes rents and profits (income from property):
  • Instead of interest, or
  • Instead of principal, or
  • Instead of both.
• No personal liability on mortgagor.
• Mortgagee cannot sue for sale or foreclosure.
• Mortgagee recovers money through income from property.

English Mortgage

• The mortgagor promises to repay the loan on a fixed date.
• The property is transferred absolutely to the mortgagee.
• There is a condition that the property will be returned on repayment.
• The mortgagor retains a right to get back the property (right of redemption).

Mortgage by Deposit of Title Deeds

• Also called equitable mortgage.
• Essentials:
  • There must be a debt,
  • Title deeds are deposited,
  • There is intention to create security.
• No formal written document is required in many cases.

Anomalous Mortgage

• Any mortgage which does not fall under the above categories.
• It may be a combination of different types.
• Example:
  • A mix of simple mortgage and usufructuary mortgage.
• Rights and liabilities depend on the contract between parties.

Important Case Law

• Chunchun Jha v. Ebadat Ali: Intention of parties must be gathered from the document itself.
• Bhaskar Waman Joshi v. Narayan Rambilas Agarwal: Form and condition in document are important to decide nature of transaction.
• Umabai v. Nilkanth Dhondiba Chavan: True nature depends on intention and surrounding circumstances.
• Pratap Bahadur v. Gajadhar: Possession in usufructuary mortgage may be given later.

Distinction / Comparison

Simple Mortgage vs Usufructuary Mortgage

Practical Example

A borrows money from B.

• If A keeps possession and promises to repay, it is a simple mortgage.
• If A gives possession and B recovers money from rent, it is a usufructuary mortgage.
• If A transfers property with a condition to get it back on repayment, it is a mortgage by conditional sale.

Summary

• Six types of mortgages are recognised under law
• Simple mortgage: no possession, right to sell through court
• Conditional sale: sale with condition of return or absolute ownership
• Usufructuary: possession given, loan recovered from income
• English mortgage: absolute transfer with condition to return
• Title deed mortgage: security by depositing documents
• Anomalous mortgage: mixture of different types
• Nature depends on intention and terms of agreement