Nearly everyone who wishes to buy a home ends up taking a home loan. Say you have your eye on a beautiful apartment in Chennai, you will need to finance the purchase. For that, you will approach a reputed lender like a bank to loan you money. Mortgages are a type of Home loan, in which the lender lends the borrower money, against the property itself.
There are a total of 6 types of mortgages in India. It is important to know how each one works if you want to make an informed choice. Learn about them in detail before choosing what type of mortgage to go with as it is a long term commitment.
This is the most common type of mortgage. The lender or mortgagee lends money to the borrower or mortgagor. The lender cannot take possession of the property since the borrower has made a legal contract to pay back the mortgage. The lender only retains the right to possess and sell the property in the event the borrower is unable to pay back the loan. The borrower needs to set up a repayment plan and pay the allotted monthly instalments till the debt is paid off.
An English mortgage is similar to a sale agreement, whereupon the lender retains possession of the property. The borrower has to pay off the mortgage amount within a stipulated time period. Once the amount is repaid in full, the lender transfers the property back to the borrower. In case the borrower fails to repay the money within the fixed date, the lender retains possession of the property.
The usufructuary mortgage is similar to an English mortgage except there is no fixed timeline of repayment. The Mortgagee or lender is granted possession of the property until the borrower pays off the mortgage amount. They are also entitled to any profit from the property incurred in the form of rent, lease money, etc. The lender has full liberty to generate income from the property as they see fit except to sell it.
Mortgage by deposit of Title Deeds:
In this mortgage, the borrower has to submit their documents of title of the property that will be placed as collateral. This is to provide as surety to the lender that the loan would be repaid in full, after which the documents would be returned to the borrower. The borrower would continue to enjoy the benefits of the property like living in it, renting it, leasing it, etc. while continuing to keep paying back the loan to the lender.
Mortgage by conditional sale:
The borrower sells the property to the lender, on the condition that the sale will become absolute if there is a default on repayment on the loan. When the borrower finishes repaying the mortgage to the lender, the sale will become void, and the lender will transfer the property back to the borrower.
An anomalous mortgage is the term used to refer to mortgages that don’t fit any of the above mentioned categories. It might be a special case or it may be a loan taken from a lender who isn’t registered legally.
Lifestyle Housing is a developer of luxury flats in Chennai. Our 3 BHK flats in Porur are equipped with premium amenities and popular with first time homebuyers. Our real estate experts will guide you to the perfect mortgage plan for you.