Types of Mortgages in India: Simple, English & More Explained
Thinking of buying a home in India? Chances are you will be taking out a mortgage. But not all mortgages are created equal. Beyond interest rate and tenure, mortgages are classified into different types based on how ownership and possession of the mortgaged property are handled. Understanding these distinctions is crucial for knowing your rights and responsibilities as a borrower.
Simple Mortgage: Keeping Your Keys
In a simple mortgage, you mortgage your property to secure a loan but keep possession of it. You bind yourself personally to repay the loan, and if you default, the lender has the right to sell the property — but only through court intervention. You do not transfer ownership or possession. This is essentially saying: "Here is my house as collateral, but I will continue to live here and manage it."
English Mortgage: A Temporary Transfer of Ownership
In an English mortgage, you transfer absolute ownership of the property to the lender. However, there is a crucial condition: the lender agrees to retransfer the property back to you upon full repayment of the loan and interest. The lender typically does not take physical possession. Legal ownership temporarily shifts to the lender, but it is not a permanent sale — it formalises the security interest.
Mortgage by Deposit of Title Deeds (Equitable Mortgage)
This is the most common form in urban India. You simply deliver the original title deeds of your property to the lender — like a bank — with the intention of creating security. No formal mortgage deed is required, making it a quick and less expensive option. The very act of depositing the original title deeds creates an equitable mortgage. Most home loans from banks use this form.
Usufructuary Mortgage and Conditional Sale
In a usufructuary mortgage, the borrower delivers actual possession of the property to the lender, who receives rents and profits from it in lieu of interest or principal repayment. The borrower is typically not personally liable for the loan. In a mortgage by conditional sale, the borrower ostensibly sells the property to the lender, with a condition: if the loan is repaid by a certain date, the sale becomes void. If the borrower defaults, the sale becomes absolute and the lender becomes the outright owner.
Need personalised guidance?
Our experts are available to walk you through your specific situation — free of charge, no obligation.
Book a Free Call →