As a homebuyer, you’re likely familiar with the term ‘mortgage’ in association with their housing loan. This simply means that the property documents stay with your lender until the loan is fully repaid. But, did you know that there are generally two kinds of mortgage – equitable mortgage and registered mortgage?
Not sure what these terms mean? This guide will help you learn more about equitable vs. registered mortgage on housing loans.
What is Equitable Mortgage?
Also known as a simple mortgage, this arrangement is the most common. Under this arrangement, your lender lends you the principal for a long tenure of 15 to 20 years, demanding some security in return. So, the home you purchase becomes the security.
You will have to hand over original title deeds and other ownership documents to your lender until the loan is repaid in full. This means that in case you default on your EMIs, the lender will have the authority to take over your property.
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How Does Equitable Mortgage Work?
In an equitable mortgage, the borrower secures a loan by simply handing over the original title deeds of the property to the lender, without executing a formal mortgage deed or registering it. This type of mortgage is also known as a mortgage by deposit of title deeds and is legally valid in notified towns and cities under the Transfer of Property Act.
The borrower may optionally sign a memorandum acknowledging the deposit of title deeds, and minimal stamp duty may be applicable depending on state laws. Since the mortgage is not registered, it does not become a part of public records, maintaining privacy for the borrower.
The loan is disbursed after the lender verifies the documents and is satisfied with the asset’s value.
What is a Registered Mortgage?
This is a more complex arrangement where the borrower willingly transfers full ownership rights of the property to the home loan lender in case of a default in loan repayment. Meaning, the lender will have the authority to dispose of your property in any manner they see fit, should you fail to repay the loan in full.
Under this arrangement, the lender has far more rights than a simple mortgage.
How Does Registered Mortgage Work?
A registered mortgage involves a formal legal agreement between the borrower and the lender, which is documented and registered with the local sub-registrar’s office. The process begins with the drafting of a mortgage deed that clearly outlines the terms and conditions of the loan, including repayment tenure, interest rates, and rights of the lender in case of default.
The borrower pays the applicable stamp duty and registration charges, which vary depending on the state’s regulations and the loan amount. Once both parties sign the deed, it is officially registered, creating a public record of the transaction. Only after this step is the loan amount disbursed to the borrower
Difference Between Equitable Mortgage and Registered Mortgage
To give you a clearer picture, let’s compare equitable mortgage vs registered mortgage-
Point of Distinction
Equitable Mortgage
Registered Mortgage
Costs Involved
Since equitable mortgages are not registered and do not involve any legal action, all you need to do is buy a stamp paper and write down a Memorandum of Deposit (MoD) on it. So, the costs involved are lower than a registered agreement.
Under this arrangement, you are required to visit the sub-registrar’s office. The costs involved in registration may go as high as 5% of the total loan value.
Lender’s Rights
When you repay your loan in full, the lender will return your property documents without a formal procedure to record the submission. In case of a default, the lender may settle the loan by auctioning off the house. If the sale proceeds exceed the original market value, the lender will pay the excess to you.
Since the sub-registrar is aware of this agreement, the lender will enjoy rights over other parties if the property comes under dispute, and in case of a default, the ownership will transfer to the lender to do as they wish.
Borrower’s Rights
Though not registered with the sub-registrar, in case of disputes, you can approach the Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI).
Because the agreement is known to the sub-registrar, you need not fear even in case of disputes regarding property ownership.
Stamp Duty
You need to pay a stamp duty of 0.1% to 0.2% on the home value
The stamp duty is 5% of the home value
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Advantages & Disadvantages of Equitable Mortgage
Here are the advantages and disadvantages of equitable mortgage-
Advantages
Disadvantages
Lender and borrower details are private since it’s not a public record
Limited legal protection for parties since the identity is private
Lower administrative costs
Lack of transparency
No formalities of registration or legal documentation
Higher risk due to no legal backing
Higher flexibility
Establishing the terms can be challenging
Advantages & Disadvantages of Registered Mortgage
Let’s explore the pros and cons of registered mortgage-
Advantages
Disadvantages
Strong legal protection for both lender and borrower
Default may lead to legal consequences for the borrower
Allows property sale and transfer once the mortgage is cleared
Lack of privacy for lender and borrower
Borrowers may be able to fetch lower interest rates
Higher upfront cost due to registration and legal fees
Higher transparency since the mortgage details are publicly available
More paperwork and formalities involved than equitable mortgage
Follows a standardized legal process
Borrowers may have less flexibility in negotiating terms
Legal Implications & Documentation for Equitable Mortgage
Equitable mortgage is governed by the Transfer of Property Act, 1882
Title deed of the property is an important document to be deposited with the lender
Legal Implications & Documentation for Registered Mortgage
Registered mortgage also comes under Transfer of Property Act, 1882
A mortgage deed needs to be registered with a government authority
Key Factors to Look for When Choosing Between Equitable & Registered Mortgage
Before choosing between a registered and equitable mortgage, consider these key factors to make an informed decision-
Equitable Mortgage
Greater privacy: Since equitable mortgages aren’t typically registered with government authorities, they offer more privacy to both the borrower and the lender.
Flexible terms: These mortgages are based on mutual understanding, making the agreement more adaptable to individual needs and conditions.
Higher risk: Due to the lack of formal registration, lenders have limited legal recourse in the event of default, and borrowers may face less legal protection.
Registered Mortgage
Legal safeguards: Registered mortgages offer stronger legal backing, as the agreement is recorded with the sub-registrar and governed by clear legal provisions.
Full transparency: Registration makes the mortgage a public document, which increases transparency and ensures accountability from both parties.
Lower risk profile: Registered mortgages are ideal for high-value or commercial loans, where legal enforceability and security are essential for both lenders and borrowers.
Conclusion
Choosing between an equitable and registered mortgage depends on your financial goals, risk appetite, and need for legal protection. Understanding the key differences helps you make a more informed and secure borrowing decision.
As for a housing loan, apply with India’s leading lending institution, Tata Capital. We offer home loan interest rates, starting at 6.70%, along with flexible repayment options and long tenure. Know more about documentation and eligibility for home loanUse our online home loan EMI calculator.
22 April 2025
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