Facts to know about a Mortgagor

Every person is aware that for a loan to be approved, he/she must provide some form of collateral. Individuals can mortgage their properties with a bank.

The mortgagor is the person receiving the loan, whereas the mortgagee is the person providing the loan. If authorised for a loan, the mortgagor should produce a credit application and accept the mortgage terms. The mortgagee is in charge of determining the loan terms, regulating its servicing, and managing the title rights to the property asset.

Meaning of ‘Mortgage’

A mortgage is a loan used to buy or keep a house, land, or other pieces of real estate. The borrowers offer to repay the creditor over a while, usually in a series of regular instalments partitioned in interest and principal. The property considered as a mortgage serves as the collateral for the loan.

A borrower should apply for a mortgage with their selected lender and meet specific criteria, including the minimum credit scores and the down payments. Before approaching the final stage, mortgage proposals undergo a rigorous underwriting procedure.

Mortgage Money

Mortgage money is the sum of the principal amount of a loan and the amount of interest the mortgagor is liable to pay the mortgagee along with the amount referred to as the principal.

Mortgage money is:

• Any finance or any other amount related to finance, penalties, damages, charges or even any monetary liabilities,
• Payment guaranteed for a particular time through a document,
• Money by which the mortgage is significantly affected or substantiated,
• Any mortgage deed or the memorandum of deposits of the title deeds.

Mortgage Deed

The ‘Mortgage Deed’ is an instrument or legal document that codifies numerous terms and conditions related to the mortgage. It provides interest along with legal rights over the property to the mortgagee. Therefore, all of the borrower’s rights and interests pledged as collateral get codified in the Mortgage Deed. It safeguards the lender, as he/she can enforce his lawful rights over the property on failing to pay on time.

Who is a ‘Mortgagor’?

A mortgagor borrows money from a lender to purchase a home or other piece of real estate. Depending on the borrower’s credit history and collateral, mortgage loans are in various forms. The mortgagor should guarantee the title to the real estate as security for a mortgage loan.

A mortgagor borrows money from a bank or other financial organisation to buy property. The mortgagor usually puts down a deposit on the property, though this is not always needed. Then, the mortgagee funds the remainder of the purchase price, bridging the gap between the property’s cost and the down payment. The person becomes a mortgagor when he/she obtains funds to pay off the amount.

Who is a ‘Mortgagee’?

A mortgagee is an entity who lends money to the mortgagor to purchase real estate. A financial institution is usually the entity providing loans to a mortgagor. A mortgagee creates a priority legal interest in the value of the mortgaged property to limit its risk, allowing it to take it if the mortgagor defaults on the debt.

A mortgagee represents the lending financial institution’s interests in a mortgage transaction. Mortgagors can choose from several products offered by lending institutions, which account for a considerable share of loan assets for both individual lenders and the credit market as a whole.

Mortgagor Vs. Mortgagee

• A mortgagor is a person who receives the loan, whereas the mortgagee is the provider of the loan.
• A mortgagor is the giver of the collateral assets, interests, and instalments, whereas a mortgagee is a receiver.
• A mortgagor accepts the terms of the financing, whereas the mortgagee is the entity that  defines it.
• A mortgagor submits all the documents proving the eligibility for the loan. By contrast, a mortgagee prepares all the documents for the loan.
• The mortgagor has to give the property ownership until the interests and instalments are made. The mortgagee retains the property under the mortgage until full payment.
• The mortgagor ensures that he/she will repay all the instalments within the specified term and intervals. By contrast, a mortgagee decides the tenure and intervals to repay.
• A mortgagor must respect the decision of the mortgagee in the case of default, while the mortgagee has the full right to sell the property under mortgage if the mortgagor defaults on payment.

When do a mortgagor’s rights and liabilities arise?

A mortgagor’s rights and duties are established during a mortgage.

Types of loans are as follows:

1. Secured loans
2. Unsecured loans

In secured loans, the creditor takes security from the debtor in exchange for the payback of his money.

Unsecured loans are issued solely on the debtor’s creditworthiness without the need for pledging any collateral for security.

A mortgage is one approach to secure a loan. Section 58(a) of the Transfer of Property Act of 1882 defines mortgage as the transfer of an interest in a specific immovable property to secure:

• payment of money owed to or to be owed to the mortgagee through a loan, or
• a past, present, or future debt, or
• the contract fulfilment may result in a monetary liability.

What are the rights of a mortgagor?

The law governs mortgagors’ rights to protect them from unfair activities. Following is a list of some of the essential rights that mortgagors have under the Transfer of Property Act, 1882:

1. Section 60: States Right of Redemption
2. Section 60B: Provides the right to Inspection and production of documents
3. Section 61: Provides the right to redeem separately or simultaneously
4. Section 62: Allows a usufructuary mortgagor to reclaim possession.
5. Section 63: Provides accession to mortgaged property
6. Section 64: Renewal of mortgaged lease
7. Section 65A: Mortgagor’s power to lease
8. Section 66: Right in the case of waste

What are the liabilities of a mortgagor?

The rights that a mortgagor has under the Transfer of Property Act, 1882, give rise to a various liabilities outlined as follows:

1. Section 66: Liability to avoid waste
2. Section 65: Liability to indemnify for the defective title of a property
3. Section 65C: Liability to compensate mortgagee
4. Section 65D: Liability to direct rent of the lease to the mortgagee
5. Section 63A: Liability for improvements to mortgaged property

Conclusion

The concept of mortgage is one of the most vital principles under the Transfer of Property Act, 1882. Mortgage helps secure the debt owed to the mortgagor while also allowing to redeem the property once paying back the sum owed to the mortgagee.

A mortgage deed establishes numerous rights and obligations for the mortgagor and the mortgagee. Based on the underwriting considerations involved with a mortgage loan, mortgagors can acquire various mortgage loan conditions. Because mortgage loans are a type of secured loan, all mortgage loans require the pledge of real estate as collateral.