What is English mortgage?

Among 6 types of mortgages as per section 58 of the Transfer of Property Act 1882, there is one that stands out to me, the English Mortgage. I was a little confused at first but then I dug deeper into it to know english mortgage meaning, definition and its features. Here is what you need to know about English Mortgage. 

English mortgage is basically a type of mortgage wherein, the mortgagor(borrower) gives the rights of property to the mortgagee (lender) in case of payment default or repayment failure. In an english mortgage system, the mortgagee has the right to sell the property to recover the loan amount given to the mortgagor. 

In an English mortgage scheme

• The mortgagor (borrower) binds themselves to repay the loan to the mortgagee (lender) within a specific time period till a specific date.
• During the loan process, the mortgagee acquires rights to the property from the mortgagor.
• The mortgagor can claim his/her property back after the loan is completely paid off
• During the loan period, mortgagees can allow the mortgagor to occupy or rent out the property.
• In an English mortgage scheme, there is a proper transfer of property from the borrower to the lender, hence the stamp duty and registration charges are applicable as is the case in any other transfer of property.
• The sale agreement has details of the loan and all the terms associated with it.
• When the mortgagor repays the loan, the property is re-transferred in his/her name which attracts stamp duty and registration charges again.

In Indian real estate, an English Mortgage is the least opted form of mortgage. There are a few reasons attached to it.

• Only a few mortgagors and mortgagees in India can engage in English Mortgage scheme
• There is a huge cost involved in English mortgage as the stamp duty and registration charges are paid twice due to transfer and re-transfer of property.
• The mortgagee’s right to sell the property without court intervention in the case of inability of mortgagor is one of the major drawbacks, hence borrowers don’t opt for this form of mortgage.

An English mortgage is valid when a mortgage deed and a loan agreement have been signed by both the parties. It is mandatory to have all the terms and conditions clearly defined in these documents for both, mortgagor and mortgagee.

I hope you now understand English Mortgage meaning, definition, features and conditions associated with it.