When it comes to availing a mortgage loan, the borrowers are typically confronted with two big groups – registered mortgage and equitable mortgage. While both are applied with the same purpose of mortgaging property for securing a loan, there exist variations in relation to process, legal formalities, and cost implications. For individuals who intend to utilize property to meet financial needs, these variations must be familiarized with in advance of decision-making.
This article brings to light the key differences between registered and equitable mortgages, their advantages and disadvantages, and how borrowers can use services like an EMI calculator for a loan against property to make informed choices.
What Is a Registered Mortgage?
A registered mortgage, or a legal mortgage, refers to the procedure of duly transferring legal rights of ownership of the property to the lender as security. The transfer is done through a mortgage deed, which is registered at the sub-registrar’s office.
The salient features of a registered mortgage loan are:
- Mandatory registration of the mortgage deed.
- Enhanced legal security for lenders.
- Borrowers retain physical possession of the property, but legal ownership is technically vested in the lender until repayment.
- Higher costs, like stamp duty and registration charges.
This type of mortgage is preferred by lenders in cases of higher loan sizes or extra security legally required.
What Is an Equitable Mortgage?
A fair mortgage, or a simple mortgage or mortgage by deposit of title deeds, is created when the original title documents of property (e.g., the title deed) are deposited by the borrower with the lender as security. Unlike registered mortgages, this type does not have a mortgage deed that must be registered with the sub-registrar.
The salient features of an equitable mortgage are:
- Created simply by entrusting the title deeds of property to the lender.
- Lowly priced, as stamp duty and registration charges are not payable in the majority of cases.
- Time saving, thus convenient for borrowers.
- Provides sufficient security for lenders, especially for lower loan amounts.
One of the most common forms of mortgage loans in India, particularly in urban areas, is where banks and housing finance companies pursue a speedy turnaround.
Advantages and Disadvantages for Borrowers
Both mortgages have advantages and disadvantages.
Registered Mortgage – Advantages:
- Strong legal identification.
- For a high loan amount.
- Greater security for lenders improves the possibility of loan approval.
Registered Mortgage – Disadvantages:
- Higher expenses by virtue of the registration process and stamp duty.
- Longer processing time.
Equitable Mortgage – Advantages:
- Low expense and quick procedure.
- No registration formalities for the property are needed.
- Simple for the lender as well as the borrower.
Equitable Mortgage – Disadvantages:
- Poorer legal position compared to a registered mortgage.
- Generally used for medium or small loans.
Using an EMI Calculator for a Loan Against Property
Irrespective of whether a registered mortgage or an equitable mortgage is opted for, calculating the repayment is likely to be among the most significant issues for the borrower. An EMI calculator for a loan against property is a handy computer program that helps borrowers estimate roughly monthly instalments based on loan amount, interest rate, and duration.
The benefits of using an EMI calculator are:
- Proper financial planning before availing a mortgage loan.
- Ease to compare repayment scenarios at different loan amounts and tenures.
- Helps to assess affordability and avoid future repayment difficulty.
- Explains interest outgo over the loan period.
By using such a facility, borrowers are well-positioned to make reasonable decisions about whether a registered or equitable mortgage is suitable for their repayment capacity.
Which Mortgage Choice Must Borrowers Make?
Whether to get a registered mortgage or an equitable mortgage is based on considerations including loan value, urgency, and cost considerations.
- Opt for a registered mortgage when the loan value is high or if lenders especially require more concrete legal backing.
- Choose an equitable mortgage when obtaining quick, low-cost processing with middle-range loan values.
It is also required that the borrowers scrutinize the affordability of repayment using an EMI calculator for a loan against property so that instalments may be aligned with their cash flow.
The Role of Grihum Housing Finance
Although Grihum Housing Finance does not provide mortgage loans, the company is interested in educating people with the right information to make good financial decisions. By counselling borrowers with terms like registered and equitable mortgages and tools like EMI calculators, Grihum hopes to stimulate better financial awareness and better credit decisions.
Conclusion
Understanding the difference between registered and equitable mortgages is important to anyone who is contemplating a mortgage loan. Registered mortgages give more legal security but at greater costs and longer processing time, while equitable mortgages are faster and cheaper but less secure.
The lenders should always calculate repayment capacity using an EMI calculator for a loan against property before deciding on the mortgage type. Although Grihum Housing Finance does not provide mortgage loans, it is still a significant source to educate and empower individuals through proper financial awareness to make appropriate decisions.