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TYPES OF MORTGAGE

Subject

Credit Management
Submitted To:
Sir, Afzal Mahmood Khan
Submitted By
Muhammad Younas
Roll No.
MBK-M-12-03

MBA (B&F) Morning


6thsemester

ALFALAH INSTITUTE OF BANKING AND


FINANCE
BAHAUDDIN ZAKARIYA UNIVERSITY
Introduction:
MULTAN

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A mortgage is security for the payment of debt. mortgage is created by act of the parties by a
written document providing security for the performance of a duty or the payment of the debt.

Relevant provisions:
Sec. 58 transfer of property act 1882 deals with mortgage and its different kinds.

Definition of mortgage:
"Mortgage is transfer of an interest in specific immoveable property for the purpose of securing
the payment of money advanced by way of loan, an existing or future debt, or the performance of
an engagement which may give rise to pecuniary liability.

Mortgagor:
The transferor is called mortgagor.

Mortgagee:
The transferee is called the mortgagee.

Mortgage money:
The principal money and interest of which payment is secured for the time being is called
mortgage money.

Mortgage deed:
The instrument if any which the transfer is affected is called a mortgage deed.

Essentials of mortgage:
Following are essentials of mortgage.

A mortgage can be affected only on immovable property. Immovable property includes


land, benefits that arise out of land and things attached to earth like trees, buildings and
machinery. But a machine which is not permanently fixed to the earth and is shift able
from one place to another is not considered to be immovable property.

A mortgage is the transfer of an interest in the specific immovable property. This means
the owner transfers some of his rights only to the mortgagee. For example, the right to
redeem the property mortgaged.

The object of transfer of interest in the property must be to secure a loan or performance
of a contract which results in monetary obligation. Transfer of property for purposes other

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than the above will not amount to mortgage. For example, a property transferred to
Liquidate prior debt will not constitute a mortgage.

The property to be mortgaged must be a specific one, i.e., it can be identified by its size,
location, boundaries etc.

The actual possession of the mortgaged property is generally with the mortgager.

The interest in the mortgaged property is re-conveyed to the mortgager on repayment of


the loan with interest due on.

In case, the mortgager fails to repay the loan, the mortgagee gets the right to recover the
debt out of the sale proceeds of the mortgaged property

Kinds of mortgage:
Following are various kinds of mortgage.

1. Simple mortgage:
Simple mortgage is a transaction in which without delivering possession of the mortgaged
property, the mortgagor binds himself personally to pay the mortgage money and agree expressly
or impliedly that in the event if this failing to pay according to the contract the mortgages shall
have right to cause the mortgage property to be sold the proceeds of sale to be applied in
payment of mortgage money.

Essentials:

Property is mortgaged.
Possession is not delivered.
A personal obligation to pay the debt.
Obligation may be expressed or implied
The transfer of a right to cause the mortgage property to be sold in default of the
payment.

2. Mortgage by conditional sale:


Where the mortgagor ostensible sells the mortgaged property on condition that on default of the
payment of the mortgage money on a certain bate the sale shall become absolute or on condition
on such payment being made the sale shall become void or on condition that on such payment
being made the buyer shall transfer the property to the seller the transaction is called a mortgage
by conditional sale and the mortgagee, a mortgagee by conditional sale.

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Essentials:

This mortgage is a form of sale.


The sale becomes absolute on the non-payment of mortgage money.
The sale may become void on the non-payment of mortgage money.
No delivery of possession is given.
There is no personal liability on the part of the mortgagor to pay the debt.
The remedy of the mortgage is by foreclosure only.

3. Usu-fructuary mortgage:
Where the mortgagor delivers possession or expressly or by implication binds himself to deliver
possession of the mortgage property to the mortgagee and authorize him to retain such
possession until payment of the mortgage money, and to receive the rent and profits accruing
from the property or any part of such rent and profit and to appropriate the same in lieu of
interest, or in payment of the mortgage money, or party in lieu of interest or partly in payment of
the mortgage money, the transaction is called an Usu-fructuary mortgage and the mortgagee an
Usu-fructuary mortgagee.

Essentials:

No personal liability on the mortgagor.


Possession of property is delivered to the mortgagee.
No time period is fixed, to pay the mortgage money.
Mortgagee can not sale out the property.
Mortgagee is entitled for rents and profits of the mortgage property.

4. English mortgage:
Where the mortgagor binds himself to repay the mortgage money on a certain date, and
transferred the mortgage property, absolutely to the mortgagee, but subject to a proviso that he
will re-transfer is to the money as agreed, the transaction is called an English mortgage.

Essentials:

Mortgagor binds himself to re-pay the mortgagee on a certain date.


The property is absolutely transferred to the mortgagee.
Transfer of property should be subject to the proviso that the mortgagee will recover the
property to the mortgagor on the payment.

5. Mortgage by deposit of title deed:


It is also known as equitable mortgage and is defined as;

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Where the person specify in his behalf, delivers to a creditor or his agent documents of title to
immoveable property, with intent to great a security thereon, the transaction is called a mortgage
by deposit of title deed.

Essential:

Document of titled deed is deposit as security.


There is a debt.
On the payment of mortgage money, the title deed is returned to the mortgagor.

6. Anomalous mortgage:
A mortgage which is not a simple mortgage, mortgage by conditional sale, a Usu-fructuary
mortgages and English mortgage by deposit of title deed is called anomalous mortgage.

Remedies for mortgagor:


Mortgagor has following remedies.

Suit for sale.


Suit for money.

How conditional mortgage is determined:


The court generally applies certain tests to determine whether the transaction was sale with a
condition or repurchase or a mortgage by way of conditional sale.

The existence of debt indicates a mortgage.


The long period of repayment indicate a mortgage.
A stipulation for interest on repayment indicated mortgage.

Conclusion:
To conclude I can say that a mortgage is the transfer of an interest in specific immovable
property for securing the payment of money advanced or to be advanced by law of money. The
different kinds are simple, conditional, Usu-fructuary, English by deposit of title deed and
anomalous mortgage