Types of Mortgage in India
| Type | How it Works | Registration | Common Use |
|---|---|---|---|
| Simple Mortgage | Borrower pledges property as security — no possession transfer; lender can sell on default via court | Mandatory | Formal lending, LAP |
| Equitable Mortgage (MODT) | Borrower deposits title deeds with lender — creates mortgage by deposit | Not required in most states | Bank home loans — most common |
| English Mortgage | Borrower transfers property to lender with agreement to retransfer on repayment | Mandatory | Rare in India |
| Usufructuary Mortgage | Borrower delivers possession; lender collects rent/profit as interest repayment | Mandatory if >1 year | Agricultural loans traditionally |
| Mortgage by Conditional Sale | Property sold conditionally — sale becomes absolute on default, void on repayment | Mandatory | Rare today |
Equitable Mortgage (MODT) — How Home Loans Work
When you take a home loan, the bank does not take a registered mortgage deed. Instead, you sign a Memorandum of Deposit of Title Deed (MODT) and deposit your original property documents with the bank. This creates an equitable mortgage — the bank holds your title deeds as security without registration in most states.
MODT stamp duty: Though equitable mortgage via MODT doesn't require Sub-Registrar registration, most states charge stamp duty on the MODT document itself — typically 0.1–0.2% of the loan amount. This is paid at the time of creating the mortgage. Check your state's stamp duty on MODT before finalising loan.
What Happens if You Default?
If a borrower defaults on a home loan secured by equitable mortgage, the bank can invoke the SARFAESI Act 2002 (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act) to recover dues without going to court:
SARFAESI Recovery Process (for defaults >90 days)
- Bank issues 60-day demand notice to borrower to clear dues
- If unpaid after 60 days — bank takes symbolic possession of property
- Bank issues 30-day public notice for sale of property
- Property auctioned — proceeds applied to clear loan + costs
- Surplus (if any) returned to borrower
Related Terms
Frequently Asked Questions
A mortgage deed is a legal document pledging immovable property as security for a loan. For home loans, banks typically use an equitable mortgage created via MODT (Memorandum of Deposit of Title Deed) — the borrower deposits original title documents with the bank without a registered deed. On full repayment, the bank issues an NOC and returns original documents.
A sale deed permanently transfers property ownership from seller to buyer. A mortgage deed pledges property as security for a loan — ownership stays with the borrower; the lender gets a charge on the property. On full loan repayment, the mortgage is discharged and the charge is removed. If the borrower defaults, the lender can sell the property to recover dues.
For home loans using equitable mortgage (MODT), registration at the Sub-Registrar is generally not mandatory — title deed deposit creates the mortgage. However, stamp duty on the MODT document is payable in most states. Simple mortgage deeds require mandatory registration. Check your state's specific requirements with your bank.
Check the Encumbrance Certificate (EC) for the property — it lists all registered encumbrances including mortgages. Equitable mortgages (MODT) are reported to CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest) — you can check at cersai.org.in. Always verify EC and CERSAI before buying any resale property.
You cannot sell a mortgaged property without the lender's consent. Typically: you (or the buyer) use the sale proceeds to repay the outstanding loan first, the bank issues NOC and returns original documents, and then the sale deed is registered. In some cases, the buyer's bank directly coordinates with the seller's bank for loan closure before releasing funds.