What is a Mortgage Deed?

Section 55(2) of the Transfer of Property Act, talks about

some relevant covenants or agreements which the parties
are required to enter into for the conveyance of
immovable property such as lease, sale, Mortgage, gifts
etc. The mortgage deed is an instrument or a legal
document containing terms and conditions relating to the
Mortgage. The deed provides the lender with the interest
and legal rights over the property. All the rights and
interests over the property that the borrower has pledged
as collateral are legalized in the Mortgage Deed. In case of
any default or failure to pay the loan amount, the lender
can claim his legal rights over the property. 

Registration of Mortgage Deed

Registration of mortgage deed is essential to give legal

validity to the document. In case of Mortgage by Delivery
of Title Deed, registration is not required. Following are
the conditions which need to be fulfilled for a valid
registration:

 The deed must be signed by the Mortgagee.

 At least two witnesses must attest to the deed.
 Stamp duty must be paid accordingly; otherwise, the
document is not enforceable.

When is the Mortgage Deed required?

 Itis generally required when you are loaning money

from another person or business and want to
transfer the interest of the property to another
person.
 When you want to borrow money and are required to
mortgage your property as a collateral. The deed
helps you secure your rights and interest over the
property.

Why is the Mortgage Deed required?

  The first and foremost requirement of the mortgage
deed is to determine the parties to the deed, i.e.
the Borrower/Mortgagor and the lender/Mortgagee.
 The deed enforces the rights of the lender in the
Court. It ensures that in case of the default or
delay in repayment of the loan, the lender will get
paid by selling the property.
 The mortgagee has the right to foreclose on the
property in case the mortgagor stops paying or
breaches the terms of the Contract. 
 The deed gives a thorough investigation as to the
interest and title over the property. It helps to
determine the rightful owner of the mortgaged
property.
 The mortgage deed helps to determine the loan
amount and the rate of interest.
 The mortgage deed also gives the right to the
mortgagee to take possession of the property, if
specified in the Contract.
 The mortgage deed acts as evidence that the
property is transferred to the lender. 

Essential elements of Mortgage Deed

I hope now you have understood the basics of a mortgage
and mortgage deed by now. Being a layman, you might
not understand the legal language used in a contract. You
might leave such things on your legal representative, but
you should at least have the basic understanding of the
clauses and terms in a Mortgage Deed. Following are the
clauses in the Mortgage Deed which you must
understand:

Parties

It is essential to specify the name of the mortgagor and

the mortgagee in the mortgage deed. The person who
transfers the interest of his property as collateral to take a
loan is called mortgagor, whereas the person to whom
such interest is transferred is called the mortgagee. It
must be noted that the mortgagor must be competent to
enter into a contract as per under the Indian Contract Act,
1872  whereas the mortgagee may be a minor. He may
not be competent as per the Contract Law. 

Description of the Deed 

It is essential to specify the title of the deed in capital

letters for example “THE DEED OF MORTGAGE.”

Details of the property

In this clause, all the material description of the

mortgaged property should be specified. For e.g.: the
location of the property, the value of the property, its
specification and all the material facts which need to be
disclosed should be mentioned. 

Recital

Recitals in a contract are the introductory statements

disclosing the intention of the parties to enter into the
Contract. The recital is also called the preamble containing
a few characteristics of the agreement. It usually starts
with a sentence like “Whereas the mortgagor has
agreed” or “whereby the mortgagor has the rights”. 

Habendum

This particular clause determines the quality or extent of

the interest of the mortgagee and the mortgagor over the
mortgaged property. The provision defines the rights that
the mortgagee is going to enjoy over the property. It also
restricts the rights of the mortgagee as per the
agreement.

Covenant for repayment

This clause specifies the modes and conditions for the

repayment of the loan amount. The clause also recites the
consideration and tenure for the repayment of the
mortgaged money. It also specifies what are the
conditions when the mortgagor wants to pay the loan
before the stipulated time period.

Mortgage Clause

This clause highlights the type of Mortgage the parties

have agreed. It is the most important clause of the
mortgage deed as all the rights and duties of both the
parties are dependent on the type of Mortgage by which
the property is being mortgaged. Say for example, in the
English Mortgage the mortgagee has the absolute right to
sell the property. While the simple mortgage possession of
the property is not necessary. The clause also describes
the duty of the mortgagee and mortgagor like:

 In case the mortgagee has repaired the property, he

can claim the money from the mortgagor if given in
the Contract.
 The mortgagor shall repay all the other costs.
 If it is specifically mentioned in the clause that the
mortgagor cannot lease the mortgaged property
without taking the prior permission of the
mortgagee, the former cannot do so without the
consent of the latter.

Possession

The clause decided whether the mortgagor has the right

to exercise possession over the mortgaged property or
not. It also depends upon the type of Mortgage you are
choosing to mortgage the property. E.g., in the simple
Mortgage, the possession may remain with the mortgagor.
On the contrary, in the Usufructuary Mortgage, the
possession of the mortgaged property must be delivered
to the mortgagee.

Title deeds
The above clause clarifies as to what title deeds need to
be transferred to the mortgagee. If it is given in the
clause that all the title deeds related to the mortgaged
property must be given to the mortgagee, then the
mortgagor shall transfer all the documents of the title
deed to the mortgagee. 

Insolvency

This clause is an essential clause in the mortgage deed as

it specifies the treatment of mortgaged property in case
the mortgagor is declared insolvent. 

Required Documents

In this clause, all the documents which are necessary for

making the deed valid and identifying the parties are
specified. For e.g.: PAN card, NID card, Passport, Bank
passbook, Property Documents, Voter’s ID, Driving
License.

Redemption clause

Redemption is again the most important and fundamental

right possessed by the mortgagor. It is an essential
attribute of the transaction of the Mortgage. It’s a
statutory right given to the mortgagor under Section 60 of
the Act. The clause specifies the tenure of the mortgage
deed as to when the mortgagor is entitled to get his
property back. The clause says that on payment of the
principal and interest after the expiry of the due date for
the repayment of money, how the property is supposed to
go back to the real owner of the mortgaged property. 

Attestation and stamp duty

It is pertinent to state that the mortgage deed shall be
duly registered and stamped to have legal validity. In case
of a Simple mortgage, if the deed is not signed, registered
and attested by at least two witnesses, it is equivalent to
not having a contract in the first place. The criteria of
attestation and registration depend upon the kind of
Mortgage. There are some kinds of mortgages that require
no registration and attestation if the principal money is
less than 100 rupees. 

The nominal stamp fee must be paid. The stamp fees

depend upon the state the property is located. 

Certain clauses which should not be ignored 

We generally take loans from banks. They usually have
standard contracts. We just sign them without reading the
whole agreement, which later on hurt us. So it is essential
to read the following clauses carefully: 

Interest rates

We have to be very careful about the interest rates

charged by the mortgagee. Sometimes it is a fixed rate,
but sometimes the rates can be fluctuating, which is a
matter of concern. The fluctuating interest rate empowers
the mortgagee to change the interest rates according to
the fluctuations in the base rates. So whenever you are
signing any mortgage agreement, you must carefully look
at the interest rates in the agreement.

Amendment clause 

Such clauses may completely go against the interest of

the mortgagor as it gives power to the mortgagee to alter
the clauses of the agreements in the event of the default
of the party. 

Lease Clause

This clause allows the mortgagor to lease the mortgaged

property with the prior permission of the mortgagee. This
clause is beneficial for the mortgagor.
Possession

You must check carefully whether you have to give the

possession of the property to the mortgagee or not.
Sometimes this clause creates legal issues if not read
properly as there can be loopholes in this clause.

Wrapping up
It is imperative to understand the terms and conditions of
a contract you are entering into. Legal professionals may
make mistakes while drafting a mortgage deed, but you
need to make sure that you won’t suffer from the common
issues only because of negligence. There are some
essential clauses in the deed which can create a lot of
problems for you if not read correctly. That is why the
understanding of these important clauses is necessary. I
hope this article has helped you and made you understand
about the Mortgage, the mortgage deed and some
important clauses which are the backbone of the whole
deed of Mortgage.