Know the Difference Between a Registered Mortgage and Equitable Mortgage

difference between equitable mortgage and registered mortgage

Owning a residence is a predominant desire for numerous individuals. However, purchasing a desired house in full is a luxury beyond the financial means liteblue usps app of many. Therefore, borrowers often opt for home loans to avoid overspending.

Essentially, a person mortgages their property when taking a home loan. This allows lenders to retain the property in exchange for funds. Lenders can hold the property papers until the loan is repaid.

In instances where payment defaults occur, punitive measures may be taken against borrowers by lenders. They can seize the property and recover the loan amount.

Equitable and registered mortgages are two types of mortgages in India. Let’s understand what each means and the difference between a registered mortgage vs equitable mortgage.

What is an Equitable Mortgage? 

Equitable mortgages are created when both the borrower and the lender come to a mutual agreement regarding borrowing money, without any involvement or intervention from external parties like third-party organisations or governmental bodies. 

Equitable mortgages, also known as implied or constructive mortgages, are similar to typical mortgages in that they transfer ownership. Lenders receive ownership of the collateral in exchange for providing financial aid to borrowers.

Lenders have the authority to auction the property in case of non-repayment issues, protecting their investment wholly. Stamp duty and other fees are relatively lower due to this reason compared to a registered mortgage.

What is a Registered Mortgage? 

Registered mortgages involve registering with the sub-registrar responsible for managing property ownership records. Thus, lenders and borrowers are both protected. Registered mortgages also give lenders a legal right to the property and can claim ownership postal liteblue if the borrower defaults on their loan. Lenders can auction off the properties if borrowers are unable to repay the dues.

Lender retains the title deed until they receive the full payment for the loan. A registered mortgage is preferred by lenders as it provides a high degree of legal protection.

Many lenders offer the same to help you fulfill your dream of owning a home at affordable interest rates. They also offer convenient and flexible repayment tenures, a digital application process, and exceptional customer service.

Registered Mortgage vs Equitable Mortgage

Registered mortgages and equitable mortgages can be differentiated based on the following features.

Meaning

Registered mortgages are mortgages that must have formal approval from a sub-registrar. Lenders and borrowers both must get this approval. Equitable mortgages are ones that do not require any such formal approvals. Lenders and borrowers can have a verbal or written agreement.

Lender’s right

Registered mortgages are mortgages where lenders have the freedom to make decisions regarding the property in scenarios of non-payment. Equitable mortgages are mortgages where the lender can auction the property to recoup the loan amount.

Cost

Registered mortgages involve a tiresome and costly process. Equitable mortgages involve stamp duty charges as high as 5% of the house’s value. Equitable mortgages involve a straightforward and less expensive process. They include stamp duty as low as 0.1% – 0.2% of the home’s value.

Documentation

Under registered mortgages, borrowers approach the sub-registrar’s office to buy stamp paper. Under equitable mortgages, borrowers will buy the stamp paper themselves.

Risk

Registered mortgages are more secure since they are registered with the legal authorities. Lenders and borrowers because of this reason feel more secure and protected. 

Equitable mortgages do not involve any kind of legal protection from authorities. Thus both parties have a higher risk.

Conclusion

Registered mortgages and equitable mortgages are two options when pledging a house for obtaining a home loan. Both options have unique benefits but are distinguishable on the basis of cost, legal provisions, registration, risk and process. 

Lenders prefer registered mortgages over equitable mortgages as they are secured. Lenders can thus be assured of their repayment and gain peace of mind.

Equitable mortgages are risky as only borrowers and leaders are aware of the agreement. Equitable mortgages are considered misleading by many lenders andreaabelix.  

Borrowers must carefully evaluate both equitable and registered mortgages and opt for the one that aligns with their demands.

Take careful consideration of your borrowing capacity to make informed decisions and handle the monthly budget cautiously.

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