The Top Differences Between Equitable Mortgage and Registered Mortgage

One essential decision when taking out a loan against your property involves the type of mortgage to use: equitable or registered mortgage. Both are common in India, and understanding the differences can help you make an informed decision.

What is Equitable Mortgage?

An equitable mortgage is a mortgage type where the borrower is known to transfer the property's title deeds to the lender as security for the loan. Although the title deeds are handed over, the borrower remains the legal owner.

What is Registered Mortgage?

A registered mortgage, on the other hand, is created when a mortgage deed is formally registered with the Registrar of Deeds. The transaction is documented publicly, providing legal security to the lender and transparency to third parties.

The Main Differences Between Equitable Mortgage and Registered Mortgage

• Registration: The crucial difference between the two lies in their creation. An equitable mortgage is formed when the borrower deposits the title deeds with the lender, whereas a registered mortgage requires a registered deed.

• Costs: In an equitable mortgage, the borrower does not have to pay registration fees, making it less expensive upfront than a registered mortgage.

• Protection: Registered mortgages provide superior legal protection to the lender. If the borrower defaults, lenders have a superior right over the property in recovering their dues.

• Transparency: Registered mortgages are publicly recorded and hence offer more transparency for third parties. On the other hand, equitable mortgages are private arrangements between the lender and borrower.

Making the Choice

The decision between an equitable mortgage vs. registered mortgage often comes down to the specifics of your situation. Both have their merits, and the best choice depends on your unique needs, the property's value, the loan amount, and the lender's requirements.