Types of Mortgage Loans

A mortgage loan is a secured loan where an applicant borrows a certain amount of money by mortgaging property. Hence, mortgage loans are also known as loans against property. Read ahead to know more about the various types of mortgage loans.

Different Types of Mortgage loans

There are 6 types of mortgage loans in India, based on the nature of contract between the lender and borrower. They are described below -

Simple Mortgage

This is one of the most popular mortgages in India. These points will make it clearer -

The borrower mortgages his/her immovable asset to avail a loan
The property does not get transferred to the lender
The lender has the right to sell the mortgaged property in case the borrower fails to repay the loan on time
On the occasion of sale of the property, after the bank takes the principle and the interest, the balance needs to be transferred to the owner
This kind of mortgage is registered with the government, and is also known as a registered mortgage

English Mortgage

The following points will explain the English Mortgage in detail -

In this case, the ownership of the mortgaged property is transferred to the lender
The lender is entitled to take possession of the mortgaged property in case the buyer fails to repay the loan amount by the decided date
In this duration, the borrower is allowed to either rent the property or occupy it
Once the payment has been completed, the lender is supposed to retransfer the possession to the borrower

Mortgage By Title Deed Deposit

This is also referred to as the Equity Mortgage, and it is one of the two most popular ones in India. These points will explain it better -

In this case, the borrower transfers the documents or the title deed of the property to the lender in order to avail a loan.
The intent is to create a security as it becomes easier for the lender to recover their money.

Mortgage By Conditional Sale

Here are some points that will explain this type of mortgage in detail -

The borrower sells the property to the lender on some conditions, which is referred to as a mortgage conditional sale
If the borrower is unable to pay the amount that he owes, the sale will become absolute
If the borrower successfully pays the loan, the sale will become void
The fact that it is a mortgage sale is to be mentioned clearly in the mortgage deed so that it is not confused with a normal conditional sale

Usufructuary Mortgage

If you are searching for ‘usufructuary mortgage meaning’, it is important to iterate that this type of mortgage is not used in India commonly. It can be explained through these pointers -

In this case, the borrower transfers or promises to transfer the possession of the mortgage to the lender
The possession is supposed to stay with the lender until the borrower returns the money that he owes
The lender can receive the rents and profits in lieu of the interest or the mortgage-money
Once the payment is completed, the possession will be transferred back to the owner/borrower

Anomalous Mortgage

This is a type of mortgage that cannot be classified under any of the previous five types. If a mortgage deed is too customized, and uses points from one or more of the five types of standard mortgages, it is referred to as an Anomalous Mortgage.

Difference Between Simple Mortgage and Equitable Mortgage

These two mortgages are the most commonly used in India. Let us look at the differences between them using this simple table -

Simple / Registered Mortgage	Equitable Mortgage
The title deed and property documents do not need to be submitted to the lender	It is essential to submit the title deed and property documents to the lender
The loan agreement happens between the lender and the borrower, but it is also registered at the sub-registrar’s office	The loan agreement is signed just between the lender and the borrower
After the dues have been paid, the lender issues a Memorandum of Release of Mortgage, which again needs to be registered at the sub-registrar’s office	After the dues have been paid, the lender simply hands over all the property documents to the borrower and issues a No Dues Certificate
It reflects in the encumbrance certificate	Does not reflect in the encumbrance certificate
It involves more hassle, but risks for both the lender and the borrower	Involves higher risk, but is a hassle-free option, that takes lesser time and money

Conclusion

In India, mortgage loans are one of the most sought-after financial options, as they help raise funds using an existing property. They serve a great option where instead of selling your property, you can use it as collateral to get a loan and fulfill your diverse requirements.

The following are some common examples or types of mortgage loans in India -

Home loans
Loans against property
Second mortgage loans
Lease rental discounting
Loan to purchase commercial property

If you are a property owner and are looking for a loan against it, you can choose any kind of mortgage loan depending on your need.

Types of Mortgage Loans - Related FAQs

1. What is a usufructuary mortgage?

In case of a usufructuary mortgage, the borrower transfers the possession of the house to the lender, who can then collect rent and profits until the borrower returns the dues. Once the dues are paid off, the possession is supposed to be transferred back to the borrower or the owner.

2. What are the types of conventional mortgage loans?

A conventional mortgage loan is a type of loan that the government does not insure. It can be of two types - conforming or non-conforming.

3. What is an anomalous mortgage?

Any customized type of mortgage loan, whose deed does not conform to either of the 5 types is referred to as an anomalous mortgage.

4. Can first time home buyers avail a mortgage loan?

Yes, first-time home buyers can avail a mortgage loan, and most of them prefer it. There are various types of mortgage loans available for first-time home buyers in India.

5. Is CIBIL score required for a mortgage loan?

Yes, all loan providers will run a CIBIL check before approving a loan. But in case of a mortgage loan, a low CIBIL score will not be a roadblock.

6. What are the benefits of mortgage loans?

There are multiple benefits associated with a mortgage loan -

Loan amount can be up to 70% of the property value
No restriction on the end use of the loan amount
Flexible and long repayment tenures
Simple eligibility criteria
Comparatively higher loan amounts
Minimal documentation requirements