What is Equitable mortgage home loan?

When we plan to purchase a house, usually the two options available are down payment or taking a loan to make the payment. The borrower takes money from the lender and keeps his/her property as a security against the loan amount taken.

Equitable Mortgage

Equitable mortgage also known as Mortgage by deposit of title deeds is created by the borrower in favour of the lender by deposit of title deed of immovable property as security to a lender until the loan is fully paid back.

When the borrower agrees to the agreement that his property will be kept collateral and deposits the title deeds of that property with the lender, an equitable mortgage is created.

The person borrowing and transferring his interest in an immovable property to the lender is the mortgagor and the lender is the mortgagee.

How Equitable Mortgage is created ?

The mortgage is created by mere deposit of title deeds (original ownership documents) and executing a memorandum of deposit of title deeds. When the mortgagor borrows money from a lender, the property documents remain with the lender. A memorandum of the title deeds is executed from the borrower’s side.

This memorandum is a record of all the documents submitted to the bank, it also states that the borrower has voluntarily submitted all the home loan documents and stamp duty has been paid.

Title Documents

Title documents can be sale deeds, gift deeds, exchange deeds, partition deeds and succession certificates. These documents confirm the ownership of the property.

Filing is done when the borrower sends a notice of intimation to the Sub-Registrar’s Office (SRO). The fee to be paid for stamp duty varies from 0.1% to 0.2% of the value of the home depending on the state you live in

It is also mandatory to record MOD (Memorandum of Deposit) with an institution called CERSAI (Central Registry of Securities Asset Reconstruction and Security Interest).

Upsides to equitable mortgage loans

The stamp duty and other charges are comparatively low and more economical than a registered mortgage. Equitable mortgages are still more common than registered mortgages. The borrower and lender need not go to the SRO while creating an equitable mortgage.