Types of Mortgage Under explained: this guide covers what Types of Mortgage Under means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
What Is a Mortgage?
Under Section 58 of the Transfer of Property Act, 1882 (TPA): "A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability." The person who transfers the interest is called the mortgagor (borrower), the person to whom the interest is transferred is the mortgagee (lender), the amount secured is the mortgage money, and the document evidencing the transaction is the mortgage deed.
A mortgage does NOT transfer ownership — it transfers an INTEREST in the property as security. The mortgagor remains the owner and can redeem the property by repaying the mortgage money. The right to redeem (called the "equity of redemption") is an inherent right that cannot be taken away — this is embodied in the maxim "once a mortgage, always a mortgage."
Six Types of Mortgage Under Section 58
1. Simple Mortgage — Section 58(b)
In a simple mortgage: the mortgagor does NOT deliver possession of the property to the mortgagee but binds himself personally to pay the mortgage money. If the mortgagor defaults: the mortgagee has the right to cause the property to be sold through court and recover the money from the sale proceeds — but the mortgagee CANNOT take possession or sell the property themselves without court intervention.
Key features: (a) No transfer of possession, (b) Personal liability of mortgagor, (c) Enforcement only through court sale (Section 67), (d) Must be registered (Section 59). Most common type for bank home loans and institutional lending.
2. Mortgage by Conditional Sale — Section 58(c)
The mortgagor ostensibly sells the property to the mortgagee with conditions: (a) on default in payment of mortgage money by a specified date: the sale becomes absolute, OR (b) on repayment of mortgage money: the sale becomes void (the "sale" is cancelled). If the condition is that on default the sale becomes absolute: it is a mortgage by conditional sale. The transaction LOOKS like a sale but is actually a mortgage — courts examine the true nature of the transaction, not just the form.
Key features: (a) Ostensible sale with conditions, (b) On default: property passes to mortgagee, (c) Mortgagor has right to redeem before foreclosure, (d) Must be registered. Distinguished from a true sale by: (a) existence of a condition for reconveyance on payment, (b) relationship of debtor and creditor between the parties.
3. Usufructuary Mortgage — Section 58(d)
The mortgagor delivers possession of the property to the mortgagee, and the mortgagee receives the rents and profits (usufruct) from the property — which are applied toward the mortgage money (first toward interest, then toward principal). The mortgagor is NOT personally liable — the mortgagee's remedy is limited to the rents and profits from the property. There is no foreclosure or sale — the mortgagee retains possession until the mortgage money is fully recovered from the rents and profits.
Key features: (a) Possession transferred to mortgagee, (b) Mortgagee receives rents/profits, (c) No personal liability of mortgagor, (d) No right to sell — only rents/profits, (e) Property returns to mortgagor when debt is satisfied from rents.
4. English Mortgage — Section 58(e)
The mortgagor binds himself to repay the mortgage money on a certain date, and transfers the property absolutely to the mortgagee with the condition that the mortgagee will re-transfer the property upon repayment. If the mortgagor defaults: the mortgagee can sell the property without court intervention (subject to giving reasonable notice). This is the strongest form of mortgage from the lender's perspective.
Key features: (a) Absolute transfer to mortgagee, (b) Condition for re-transfer on repayment, (c) Personal liability of mortgagor, (d) Mortgagee can sell without court order, (e) Must be registered. Common in commercial lending and high-value property transactions.
5. Mortgage by Deposit of Title Deeds (Equitable Mortgage) — Section 58(f)
The mortgagor delivers to the mortgagee (or the mortgagee's agent) the documents of title of the property, with the intent to create a security for the debt. No formal mortgage deed is required — the mere deposit of title deeds with the lender with the intent to create a security is sufficient. This type of mortgage can be created only in certain notified towns (Mumbai, Chennai, Kolkata, Delhi, and other towns notified by the State Government).
Key features: (a) No mortgage deed required — deposit of title deeds suffices, (b) Intent to create security must exist, (c) Available only in notified towns, (d) Registration NOT required (one of the rare exceptions), (e) Most common for bank loans — borrowers deposit property papers with the bank. Note: After SARFAESI Act, 2002: banks can enforce equitable mortgages without court intervention through the SARFAESI enforcement mechanism.
6. Anomalous Mortgage — Section 58(g)
Any mortgage that does NOT fall into the above five categories is an anomalous mortgage. It is a combination of two or more types of mortgages — or a mortgage with terms that do not fit any standard category. Examples: (a) mortgage where the mortgagee takes possession AND the mortgagor is personally liable (combination of usufructuary and simple), (b) mortgage where a portion of the property is absolutely transferred and a portion is conditionally transferred.
Comparison Table — All Six Types
| Feature | Simple | Conditional Sale | Usufructuary | English | Equitable | Anomalous |
|---|---|---|---|---|---|---|
| Possession | With mortgagor | With mortgagor | With mortgagee | With mortgagee | With mortgagor | Varies |
| Personal liability | Yes | No | No | Yes | Implied | Varies |
| Sale on default | Through court | Foreclosure | No sale | Without court | Through court | Varies |
| Registration | Required | Required | Required | Required | Not required | Required |
| Common use | Home loans | Traditional lending | Agricultural | Commercial | Bank loans | Hybrid |
Rights of Mortgagor
(a) Right to Redeem (Section 60): The mortgagor has the right to require the mortgagee to re-transfer the property upon payment of mortgage money — this right cannot be taken away by any contract (the "clog on redemption" doctrine). (b) Right to Inspection (Section 60A): The mortgagor can inspect and make copies of the mortgage deed at any reasonable time. (c) Right to Accession: Any improvements or accretions to the mortgaged property belong to the mortgagor. (d) Right to Surplus: If the property is sold for more than the mortgage money: the surplus belongs to the mortgagor.
Rights of Mortgagee
(a) Right to Foreclosure (Section 67): For mortgage by conditional sale — the mortgagee can apply to the court to declare the mortgagor's right to redeem foreclosed (extinguished). (b) Right to Sale (Section 67): For simple and English mortgages — the mortgagee can apply to the court (or sell directly in English mortgage) to recover the mortgage money. (c) Right to Sue for Mortgage Money: Where the mortgagor is personally liable — the mortgagee can sue for recovery of money (in addition to or instead of selling the property). (d) Right to Accession: Any improvements made by the mortgagee on the property — the mortgagee is entitled to reimbursement.
SARFAESI Act Impact on Mortgages
The SARFAESI Act, 2002 has significantly changed mortgage enforcement for banks and financial institutions. Under SARFAESI: lenders can enforce ALL types of security interests (including simple mortgage and equitable mortgage) without court intervention — by issuing a 60-day demand notice under Section 13(2) and then taking possession and selling the property under Section 13(4). This has made mortgage enforcement faster and more efficient. The SARFAESI mechanism is available for debts of Rs. 20 lakh or more. Borrowers can challenge SARFAESI action before the Debts Recovery Tribunal (DRT).
Disclaimer: This article is for informational purposes only and does not constitute legal or professional advice. While every effort has been made to ensure accuracy based on the latest laws and amendments, readers should consult a qualified professional before acting on any information provided. For expert assistance, contact us.