Difference Between Registered and Equitable Mortgage
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Know the difference between Registered and Equitable Mortgage and also know about the MODTD process in getting Bank Loan for Mortgages, Home & other purposes. In general term, if you own a property, and want to take a loan from banks on the same property, you will have to follow certain formalities and sign an agreement which is either in the form of Registered mortgage or Equitable Mortgage for the deed or loan document with the lender.
Why Do Bank Prefer Registered Mortgage or MODTD ?
Majority of the Private banks and few of the Government Banks prefer Registered Mortgage in the form of MODTD while granting any Mortgage based loan like Home Loan, Education Loan etc. The reasons are :
- In case of any dispute over the property, the lender will have more rights and power over the borrower.
- Borrower cannot sell mortgaged property until all his dues are not settled with the lender. The reason being, your property is recorded in the files of the sub-registrar.
- In the event of default, the ownership of the mortgaged property is transferred to the lender, and they can use or sell it as they see fit.
What are the Risk Factors under Equitable Mortgage ?
Under the equitable mortgage, there is no legal binding over the loan agreement and is simply based on the mutual agreement of the parties involved. However, in a registered mortgage, both the lender and borrower are bound by certain legal provisions, making it a safer financing alternative.
Difference Between Registered Mortgage and Equitable Mortgage
| Equitable Mortgage | Registered Mortgage |
| Property is being Seized on Loan Default | If you are unable to repay the loan, your property is transferred to the bank. |
| Lower Cost It is less expensive than a registered mortgage in terms of affordability | Costly It is more costly than an equitable mortgage, generally a charge of 0.1% to 0.2% of Loan amount, differs state to state |
| These mortgages do not need to be registered | A registered mortgage has to be registered compulsorily to Registration office or SRO |
| Documentation? Equitable Mortgage requires you to purchase stamp paper | Visit to SRO or Registrar Office The borrower will have to contact the sub-registrar’s office to seek a registered mortgage. |
| Total Cost Costs of Stamp Duty – 0.1 percent or 0.2 percent of the home’s value | Total Cost In usual circumstances, the loan is 0.5% of the house’s value |
| High Risk An equitable mortgage carries a higher risk than a registered mortgage | Lower Risk Because it provides security to both parties – the lender and the borrower, any registered mortgage is risk-free. |
Also Know – State wise Stamp Duty Rates in India
What is MODTD ?
Memorandum for the deposit of title deed or MODT is a common while taking loan from any of the banks in India. MODTD is generally applicable when the prior deeds of the title is not available. This is applicable majorly for home loan, Mortgage Loan, Education Loan abroad study and other borrowers. Under MODTD, It is essentially needs to be registered the title deeds and the government levies a stamp duty towards registration charges. Stamp duty charges vary from one state to the other, but on average, charges of 0.1 percent to 0.2 percent of the loan amount.
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