MORTGAGE DEED
NIKITA SHARMA
BBA LLB 9 SEM
02819103517
WHAT IS MORTGAGE?
In India, Mortgage is governed under Section 58 to 104 of the
Transfer of Property Act, 1882. A Mortgage can be defined as the
transfer of interests in a specific property to secure the loan
advanced or to be advanced in the future. In other words, we can
say that when any person takes a loan from anyone, some security
is required to be kept with the lender to have the assurance that in
case of default in the repayment of the loan, the lender can
recover his money from that security.
The person who mortgages his property against the loan is called
“Mortgagor.” Whereas the person to whom the property is
mortgaged is called Mortgagee” and the terms and conditions
related to mortgages are contained in the “Mortgage Deed”.
WHAT IS MORTGAGE DEED?
Section 55(2) of the Act, talks about some relevant covenants or
agreements which the parties are required to enter into for the
conveyance of immovable property such as lease, sale,
Mortgage, gifts etc. The mortgage deed is an instrument or a
legal document containing terms and conditions relating to the
Mortgage. The deed provides the lender with the interest and
legal rights over the property. All the rights and interests over
the property that the borrower has pledged as collateral are
legalized in the Mortgage Deed. In case of any default or failure
to pay the loan amount, the lender can claim his legal rights over
the property.
WHY IS THE MORTGAGE DEED REQUIRED?
• The first and foremost requirement of the mortgage deed is to determine the
parties to the deed, i.e. the Borrower/Mortgagor and the lender/Mortgagee.
• The deed enforces the rights of the lender in the Court. It ensures that in case
of the default or delay in repayment of the loan, the lender will get paid by
selling the property.
• The mortgagee has the right to foreclose on the property in case the
mortgagor stops paying or breaches the terms of the Contract.
• The deed gives a thorough investigation as to the interest and title over the
property. It helps to determine the rightful owner of the mortgaged property.
• The mortgage deed helps to determine the loan amount and the rate of
interest.
• The mortgage deed also gives the right to the mortgagee to take possession of
the property, if specified in the Contract.
• The mortgage deed acts as evidence that the property is transferred to the
lender.
ESSENTIAL ELEMENTS OF MORTGAGE DEED
• Parties
• Description of deed
• Details of the property
• Recital
• Habendum
• Covenant of Repayment
• Mortgage deed
• Possession
• Insolvency
• Required Documents
• Redemption clause
SOME CLAUSES THAT CAN CREATE ISSUES
Interest rates : We have to be very careful about the interest rates charged by the
mortgagee. Sometimes it is a fixed rate, but sometimes the rates can be fluctuating,
which is a matter of concern. The fluctuating interest rate empowers the mortgagee to
change the interest rates according to the fluctuations in the base rates. So whenever
you are signing any mortgage agreement, you must carefully look at the interest rates in
the agreement.
Amendment clause : Such clauses may completely go against the interest of the
mortgagor as it gives power to the mortgagee to alter the clauses of the agreements in
the event of the default of the party.
Lease Clause : This clause allows the mortgagor to lease the mortgaged property with
the prior permission of the mortgagee. This clause is beneficial for the mortgagor.
Possession : You must check carefully whether you have to give the possession of the
property to the mortgagee or not. Sometimes this clause creates legal issues if not read
properly as there can be loopholes in this clause.
CONCLUSION
It is imperative to understand the terms and
conditions of a contract you are entering into. Legal
professionals may make mistakes while drafting a
mortgage deed, but you need to make sure that you
won’t suffer from the common issues only because of
negligence. There are some essential clauses in the
deed which can create a lot of problems for you if not
read correctly. That is why the understanding of
these important clauses is necessary
