Everything To Know About Mortgage Loan

A mortgage loan is a secured loan where you give or pledge an immovable asset to the lender, such as a house or commercial property, as collateral or security to secure a loan. The lender keeps the property until you repay the loan. The borrower agrees to repay the lender over time, usually in regular payments divided into principal and interest.

A mortgage loan is an arrangement between you and a lender that gives the lender the right to repossess your property if you fail to repay the loan plus interest. A mortgage loan can be used to purchase, build, or refinance a home.

What is the difference between a loan and a mortgage loan?

The term loan can refer to any financial transaction in which one party gets a flat payment and agrees to repay it. A mortgage loan is a type of loan used to fund real estate. Mortgages are considered secured loans. A secured loan requires the borrower to pledge collateral to the lender if they fail to make payments.

The collateral in the case of a mortgage is the residence. If you stop making mortgage loan payments, your lender may take possession of your property through a foreclosure process.

What is the difference between a registered mortgage and an equitable mortgage?

Below is the difference between a registered mortgage and an equitable mortgage:

 Equitable mortgageRegistered Mortgage
DefinitionAn equitable mortgage, also known as an implied or constructive mortgage is a type of financing arrangement in which the mortgagor (borrower) and mortgagee (financial institution) agree on the terms and circumstances of the mortgage loan.A registered mortgage, also known as a deed of trust, is a financing arrangement in which the borrower willingly transfers whole property ownership to the lender if they default on their debt.
Third-partyNo third party or government agency is involved.A third party sets the term and conditions of the tenure and the agreement. After approval from the sub-registrar’s office, the final agreement is made.
RegistrationThe borrower willingly transfers his or her property title deed to the lender under this sort of loan, resulting in the development of a charge based on mutual agreement rather than registration.The agreement satisfies all legal conditions for a charge because registration is required under the registered mortgage scheme. When you settle your loan in full, you regain ownership of your property, and the lender loses all rights to it.
ProcessThe equitable mortgage requires the purchase of stamp paper.As a borrower, you must contact the sub-office registrar to begin the registered mortgage loan process.
Default on the mortgage If the borrower fails to satisfy their obligations, the lender has the right to sell the mortgaged property at auction to recoup its losses. If you default on your loan, the lender has the right to seize your property and use or sell it as they see appropriate.
AffordabilityAn equitable mortgage is less expensive than a registered mortgage. An equitable mortgage stamp duty costs between 0.1% and 2% of the property’s value.Registered mortgages cost more. If you apply for a registered mortgage, you must pay stamp duties of 5% of the home’s worth.

Also Read: Tax Benefit on mortgage loan

Homeowner’s insurance, property taxes, and private mortgage insurance are often added to your monthly mortgage payment, so make sure to factor these in when determining how much you can afford. Knowing how much you can afford each month will help determine a reasonable pricing range. Choosing between these mortgage loan options should be straightforward now that you know the difference between a registered mortgage and an equitable mortgage. A registered mortgage is preferable over an equitable mortgage in the long term since it helps both the borrower and the lender.