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Equitable Mortgage vs Registered Mortgage: Know the Difference

Published On Jun 27 2024 8:58 AM 1 min read 59 views 2230 Likes
Equitable Mortgage vs Registered Mortgage: Know the Difference

Knowing the distinctions between equitable and registered mortgages is essential when applying for a loan with property as security. While both act as loan security, they differ in costs, procedures or legal ramifications. The main distinctions between an equitable mortgage and a registered mortgage are outlined here.

What is an Equitable Mortgage?

A more straightforward and less formal way to create a mortgage is through an equitable mortgage. This is how it operates:

Procedure and Record-keeping:

  • Title Deed Deposit: The borrower gives the lender the original title deeds to the property as collateral for the loan. No official paperwork or registration is required.
  • Legal Recognition: The mortgage is enforceable in courts and recognised by equity law, even though it is not registered.
  • Simplicity: Since there are no official registration fees or stamp duty to pay, the process is simple, fast and less expensive.

Advantages:

  • Economical: Reduced expenses because there is no stamp duty or registration fees.
  • Quick Process: Since there are no extensive paperwork requirements or legal procedures, the processing time is quicker.
  • Confidentiality: Since no public documents are involved, the transaction is more private.

Disadvantages

  • Limited Legal Standing: Compared to a registered mortgage, proving the mortgage could be more difficult in a dispute.
  • Fraud Risk: Because the mortgage is not publicly disclosed, there is a greater chance that the borrower will try to obtain more than one loan on the same property.

Mortgage Registry

A registered mortgage, sometimes called a legal or formal mortgage, involves a more systematic and legally binding procedure.

Procedure and Record-keeping:

  • Formal Agreement: A mortgage deed, a formal document outlining the terms and circumstances of the mortgage, is signed by the borrower.
  • Registration: To ensure that the mortgage is publicly recorded, the deed is registered with the relevant government body, such as the land registration unit.
  • Legal Standing: In the event of a default, it will be simpler to enforce the registration due to its solid legal standing.

Advantages:

  • Legal Security: A robust legal position and more straightforward enforcement in the event of noncompliance are needed.
  • Transparency: Making the registration public lowers the possibility of fraud and gives unambiguous proof of the mortgage.
  • Many Mortgages: When there are several mortgages, the registered mortgage often has precedence over the unregistered ones.

Disadvantages:

  • Increased Costs: This entails increased costs due to legal fees, stamp duty, and registration fees.
  • Time-consuming: The requirement for official papers and registration makes the process more time-consuming.
  • Less Confidential: The transaction is not private because it is a public record.

Difference Between Equitable Mortgage and Registered Mortgage

The below table highlights some of the key differences.

Particulars Equitable Mortgage Registered Mortgage
Formality and legal standing An informal mortgage recognised by equity law based on the deposit of title deeds. Formal, recognised by statute law, involving a formal agreement and registration.
Cost and time Faster processing, less expensive. Registering a mortgage entails extra paperwork and is more expensive.
Security and enforcement Greater fraud risk and a worse legal position. More secure, easily accessible to enforce and has a robust legal foundation.
Public record Maintains privacy by not being publicly recorded. A registered mortgage ensures transparency by being publicly recorded.

In Summary

Depending on your needs and situation, you may decide between a registered mortgage and an equitable mortgage. Consider an equitable mortgage if you're looking for a quick, affordable fix and are okay with the informality of the process. However, a registered mortgage is preferable if you want robust legal protection and are prepared to pay the extra fees.

Visit IIFL Home Loans for information on affordable interest rates on home loans.

FAQs

Q1. What other name would you give an equitable mortgage?

Ans:  

Another name for an equitable mortgage is a mortgage deposited through title documents. As the name implies, an equitable mortgage is established in the lender's favour by the borrower. It involves depositing the title deed to real estate as security until the loan is paid back in full.

Q2. Is a registered mortgage required?

Ans:  

Under the terms of the registered mortgage, registration is required. Under the equitable mortgage, buying stamp paper is required. There is no registration required for an equitable mortgage.

Q3. What constitutes a suitable down payment for a home loan?

Ans:  

It is regarded as reasonable to obtain a home loan if you can put down 30–40% of the entire cost of the property.

Q4. What is a registered mortgage?

Ans:  

A registered mortgage is an official contract that is recorded with a government entity, typically a land registry, wherein the borrower promises their assets as security for a loan.

Q5. How can a registered mortgage be released?

Ans:  

Go to the sub-registrar's office, the location of the mortgage registration. Submit the paperwork and cover the necessary costs to start the removal process.

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