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Know Your Home Loan: Equitable vs. Registered Mortgage

Know Your Home Loan: Equitable vs. Registered Mortgage

As a homebuyer, you’re likely familiar with the term ‘mortgage’ in association with their housing loan. This simply means that the property documents stay with your lender until the loan is fully repaid. But, did you know that there are generally two kinds of mortgage – equitable mortgage and registered mortgage?

Not sure what these terms mean? This guide will help you learn more about equitable vs. registered mortgage on housing loans.

What is an equitable mortgage?

Also known as a simple mortgage, this arrangement is the most common. Under this arrangement, your lender lends you the principal for a long tenure of 15 to 20 years, demanding some security in return. So, the home you purchase becomes the security.

You will have to hand over original title deeds and other ownership documents to your lender until the loan is repaid in full. This means that in case you default on your EMIs, the lender will have the authority to take over your property.

Additional Read – Check Your Eligibility and Documents Required for Home Loan

What is registered mortgage?

This is a more complex arrangement where the borrower willingly transfers full ownership rights of the property to the home loan lender in case of a default in loan repayment. Meaning, the lender will have the authority to dispose of your property in any manner they see fit, should you fail to repay the loan in full.

Under this arrangement, the lender has far more rights than a simple mortgage.

Simple mortgage vs. registered mortgage

To give you a clearer picture, let’s compare the two kinds of housing loan mortgages.

Point of DistinctionEquitable MortgageRegistered Mortgage
Costs InvolvedSince equitable mortgages are not registered and do not involve any legal action, all you need to do is buy a stamp paper and write down a Memorandum of Deposit (MoD) on it. So, the costs involved are lower than a registered agreement.Under this arrangement, you are required to visit the sub-registrar’s office. The costs involved in registration may go as high as 5% of the total loan value.
Lender’s RightsWhen you repay your loan in full, the lender will return your property documents without a formal procedure to record the submission. In case of a default, the lender may settle the loan by auctioning off the house. If the sale proceeds exceed the original market value, the lender will pay the excess to you.Since the sub-registrar is aware of this agreement, the lender will enjoy rights over other parties if the property comes under dispute, and in case of a default, the ownership will transfer to the lender to do as they wish.
Borrower’s RightsThough not registered with the sub-registrar, in case of disputes, you can approach the Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI).Because the agreement is known to the sub-registrar, you need not fear even in case of disputes regarding property ownership.

Additional Read – Want to Own a Home? Find Out How

Now that you know about both mortgages, you can make an informed choice.

As for a housing loan, apply with India’s leading lending institution, Tata Capital. We offer home loan interest rates, starting at 6.70%, along with flexible repayment options and long tenure. Know more about documentation and eligibility for home loan

Use our online home loan EMI calculator.

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