Equitable Mortgage

Loans & Credit

An equitable mortgage is created by depositing original title documents of a property with a lender as security for a loan, without formal registration. Used for home loans and LAP (Loan Against Property). Cheaper than registered mortgage as no stamp duty and registration needed.

In detail

Equitable mortgage vs registered mortgage:nEquitable: deposit of title deeds (original documents). No stamp duty, no registration fee. Lender holds original documents.nRegistered: formally registered with Sub-Registrar. Requires stamp duty + registration fee. More secure legally.nnFor home loans in India: almost all home loans use equitable mortgage (deposit of title documents). For large corporate loans, registered mortgage is used.nnSARFAESI applicability: equitable mortgage fully covered by SARFAESI Act -- lender can take possession and sell without court order on default.

Real-life example

🇮🇳 India example

Anand buys flat for Rs 1.2 Cr with Rs 90L home loan. Bank takes equitable mortgage -- holds original sale deed and chain of title documents for the property until loan is fully repaid. When Anand repays the last EMI: bank returns all original documents. If Anand defaults: bank can invoke SARFAESI, attach, and auction the property without going to court.

Frequently asked questions

Can I sell a property that is under equitable mortgage? ▼
Technically possible but practically difficult -- buyer wants original documents, which are with the bank. Process: negotiate with bank for NOC (No Objection Certificate) and either use the sale proceeds to repay the loan or arrange a buyer who can take over the loan. Always disclose the mortgage to the buyer upfront.