Legal Agreements

Sample Format of Mortgage Deed

A legal agreement or a contract in which the owner of the property assigns or transfers his right to another person is called a mortgage agreement or mortgage deed. It is a legal document by which the bank or any other financial institutions lend money in exchange for taking the title of the debtor’s property.

What is Mortgage?

When a person transfers or assigns his interest in a specified immovable or movable property to another person for the purpose of securing the payment of money advanced or to be advanced by way of loan or credit; is called mortgage. The interest in a property which is being transferred is temporary and the same shall be voided once the money advanced is repaid in full.

What are the Parties in a Mortgage Deed/Agreement?

Mortgagor:

A person who transfers his right in the immovable or movable property is called the Mortgagor. The mortgagor is the person who borrows the money.

Mortgagee:

A person who lends the money to the mortgagor is called the Mortgagee. 

What are the Legal Terms Used in the Mortgage Deed?

Mortgage Money:

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

Mortgage Deed:

The instrument, if any, by which a transfer is effected is called a “mortgage deed”.

What are the Types of Mortgage Deed?

There are various types of mortgage and depending upon that various kinds of the deed are prepared.

Various type of deed is as follows:

1. Simple Mortgage
2. Mortgage by Conditional Sale
3. Usufructuary Mortgage
4. English Mortgage
5. Mortgage by Deposit of Title Deeds
6. Anomalous Mortgage

Drafting of Mortgage Deed

While drafting a mortgage deed it is necessary to keep the following points in the mind?

1. PARTIES:

There must be two parties namely Mortgagor and the mortgagee. In which one party is the borrower and another is a lender. A complete introduction of the party should be given in the deed.

2. Recital:

It is an introduction part of the deed wherein both the parties disclose their intention like; lending the money by one part as well borrowing the money.

Like “Whereas the borrower is the absolute owner of the property hereby mortgaged free from encumbrances”

“And Whereas the mortgagee has agreed with the borrower to lend him the sum of Rs”

3. Covenant for repayment:

In this clause of the mortgage deed, it generally recites the consideration of the receipt of the mortgage money and the tenure within which the mortgagor shall pay the mortgage money to the mortgagee with the interest.

4. Mortgage Clause:

Depending upon the type of mortgage this clause recites the property mortgaged. Like in an English mortgage there is a complete absolute sale to the mortgagee subject to the terms and conditions. This clause also recites the following conditions:-

• Mortgagor shall repair the mortgaged property and in case of mortgagee repairs, the same, Mortgagee’s expenses for this purpose are considered properly incurred.
• The Mortgagor covenants to ensure the mortgaged property in the name of the mortgagee.
• In case any cost beard by the mortgagee the same shall be repaid by the mortgagor.
• During the tenure of mortgage the mortgagor covenants to the mortgagee that the mortgaged property shall not be leased by him without the prior permission of the mortgagee.
• This clause also covenants that the mortgagor is debarred from redeeming the security before the lapse of a certain period and the mortgagee may also enter into an agreement that he shall not call his money before the lapse of the certain period.
• provided that: (i) If the mortgagor is declared insolvent; (ii) If he alienates the mortgaged property or creates a subsequent mortgage in favor of a third person without the consent of mortgagee, the mortgagee may call in his dues even before the expiry

5. Power of sale:

In case of default by the mortgagor, the mortgagee is entitled to recover his money by the sale of the mortgaged property.

6. Power to appoint a receiver:

Under this clause, the mortgagee shall have the power to appoint a receiver in case the payment of interest for two or more installments is in arrear.

7. Power to sell the property by the mortgagor with the consent of the mortgagee:

The mortgagor is authorized to sell the whole or part of the mortgaged property with the consent of the mortgagee provided the sale proceeds are paid to the credit of the mortgage account.

8. Possession:

In English mortgage, the mortgagee has a right to take possession of the property. In a usufructuary mortgage, the possession of the property is given to the mortgagee.

9. Attestation & Execution:

Attestation is compulsory in every mortgage. In the event where the mortgagor does not know the language, the deed must be explained to the mortgagor by some competent person.

10. Registration & Stamp duty

It is compulsory to get the deed registered in case of mortgage value of Rs.100/- and above. Both the party shall bear the cost equally.

11. The mortgagee is entitled to all the title deeds of the mortgaged property.

The application of any other law either to the mortgage or to the property under a mortgage has to be ascertained. For example Urban Land Ceiling Regulation Act.