Vinu: Good evening, Manu. Could you explain the differences between a simple mortgage, an equitable mortgage, and a registered mortgage?

Manu: Good evening, Vinu. Sure, let's go through each type of mortgage.

Vinu: Great. Let's start with a simple mortgage. What is it?

Manu: In a simple mortgage, the borrower transfers the right to sell the property to the lender as security for the loan. However, the possession of the property remains with the borrower. If the borrower defaults, the lender can sell the property to recover the loan amount. This type of mortgage usually requires a formal deed and may need to be registered, depending on local laws.

Vinu: I see. What about an equitable mortgage?

Manu: An equitable mortgage, also known as a mortgage by deposit of title deeds, occurs when the borrower simply deposits the title deeds of the property with the lender as security for the loan. There is no need for a formal mortgage deed or registration. It's considered more straightforward and less expensive than a registered mortgage. However, the lender has the right to sell the property if the borrower defaults.

Vinu: And a registered mortgage?

Manu: A registered mortgage, also known as a legal mortgage, involves the execution of a formal mortgage deed that is registered with the appropriate government authority. This type of mortgage provides the highest level of security for the lender because it creates a legally enforceable charge on the property. The process is more rigorous and involves additional costs and paperwork, but it offers clear legal standing in case of default.

Vinu: So, the main differences lie in the formalities and legal standing?

Manu: Exactly. A simple mortgage involves a deed but may not always require registration. An equitable mortgage involves merely depositing the title deeds without formal registration. A registered mortgage requires a formal deed and registration, offering the most robust legal protection for the lender.

Vinu: Which type is usually preferred by banks?

Manu: Banks typically prefer registered mortgages because of the legal security and clarity they provide. However, equitable mortgages are also common for their simplicity and lower costs. The choice often depends on the loan amount, the property's value, and the bank's internal policies.

Vinu: Thanks, Manu. This clarifies the differences between the types of mortgages.

Manu: You're welcome, Vinu. Understanding these differences can help in making informed decisions regarding property loans.