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As a homebuyer, you\u2019re likely familiar with the term \u2018mortgage\u2019 in association with their housing loan<\/a>. This simply means that the property documents stay with your lender until the loan is fully repaid. But, did you know that there are generally two kinds of mortgage \u2013 equitable mortgage and registered mortgage?<\/p>\n\n\n\n Not sure what these terms mean? This guide will help you learn more about equitable vs. registered mortgage on housing loans.<\/p>\n\n\n\n Also known as a simple mortgage, this arrangement is the most common. Under this arrangement, your lender lends you the principal for a long tenure of 15 to 20 years, demanding some security in return. So, the home you purchase becomes the security.<\/p>\n\n\n\n You will have to hand over original title deeds and other ownership documents to your lender until the loan is repaid in full. This means that in case you default on your EMIs<\/a>, the lender will have the authority to take over your property.<\/p>\n\n\n\n Check Documents Required for Home Loan<\/a><\/p>\n\n\n\n In an equitable mortgage, the borrower secures a loan by simply handing over the original title deeds of the property to the lender, without executing a formal mortgage deed<\/a> or registering it. This type of mortgage is also known as a mortgage by deposit of title deeds and is legally valid in notified towns and cities under the Transfer of Property Act. <\/p>\n\n\n\n The borrower may optionally sign a memorandum acknowledging the deposit of title deeds<\/a>, and minimal stamp duty<\/a> may be applicable depending on state laws. Since the mortgage is not registered, it does not become a part of public records, maintaining privacy for the borrower. <\/p>\n\n\n\n The loan is disbursed after the lender verifies the documents and is satisfied with the asset\u2019s value.<\/p>\n\n\n\n This is a more complex arrangement where the borrower willingly transfers full ownership rights of the property to the home loan lender in case of a default in loan repayment. Meaning, the lender will have the authority to dispose of your property in any manner they see fit, should you fail to repay the loan in full.<\/p>\n\n\n\n Under this arrangement, the lender has far more rights than a simple mortgage.<\/p>\n\n\n\n A registered mortgage involves a formal legal agreement between the borrower and the lender, which is documented and registered with the local sub-registrar\u2019s office. The process begins with the drafting of a mortgage deed that clearly outlines the terms and conditions of the loan<\/a>, including repayment tenure, interest rates, and rights of the lender in case of default. <\/p>\n\n\n\n The borrower pays the applicable stamp duty and registration charges, which vary depending on the state\u2019s regulations and the loan amount. Once both parties sign the deed, it is officially registered, creating a public record of the transaction. Only after this step is the loan amount disbursed to the borrower.<\/p>\n\n\n\n To give you a clearer picture, let\u2019s compare\u00a0equitable mortgage vs registered mortgage-<\/p>\n\n\n\n <\/p>\n\n\n\n Here are the advantages and disadvantages of equitable mortgage-<\/p>\n\n\n\n <\/p>\n\n\n\nWhat is Equitable Mortgage?<\/h2>\n\n\n\n
How Does Equitable Mortgage Work?<\/h3>\n\n\n\n
What is a Registered Mortgage?<\/h2>\n\n\n\n
How Does Registered Mortgage Work?<\/h3>\n\n\n\n
Difference Between Equitable Mortgage and Registered Mortgage<\/h2>\n\n\n\n
Point of Distinction<\/td> Equitable Mortgage<\/td> Registered Mortgage<\/td><\/tr> Costs Involved<\/td> Since equitable mortgages are not registered and do not involve any legal action, all you need to do is buy a stamp paper and write down a Memorandum of Deposit (MoD) on it. So, the costs involved are lower than a registered agreement.<\/td> Under this arrangement, you are required to visit the sub-registrar\u2019s office. The costs involved in registration may go as high as 5% of the total loan value.<\/td><\/tr> Lender\u2019s Rights<\/td> When you repay your loan in full, the lender will return your property documents without a formal procedure to record the submission. In case of a default, the lender may settle the loan by auctioning off the house. If the sale proceeds exceed the original market value, the lender will pay the excess to you.<\/td> Since the sub-registrar is aware of this agreement, the lender will enjoy rights over other parties if the property comes under dispute, and in case of a default, the ownership will transfer to the lender to do as they wish.<\/td><\/tr> Borrower\u2019s Rights<\/td> Though not registered with the sub-registrar, in case of disputes, you can approach the Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI).<\/td> Because the agreement is known to the sub-registrar, you need not fear even in case of disputes regarding property ownership.<\/td><\/tr> Stamp Duty<\/td> You need to pay a stamp duty of 0.1% to 0.2% on the home value<\/td> The stamp duty is 5% of the home value<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Advantages & Disadvantages of Equitable Mortgage<\/h2>\n\n\n\n