Most of us have heard the term Mortgage at least once. If you take a Loan Against Property, the bank mortgages the property. The bank has equal rights to our property until we are able to pay off the Loan. Till here, everything seems simple. However, confusion arises when we hear Equitable Mortgage and Registered Mortgage. Both differ regarding registration, enforcement and the degree of protection they offer lenders. So, here’s a breakdown of both options to help you make an informed decision -

What is a Registered Mortgage?

A Registered Mortgage is a formal legal document registered with the relevant land registry, such as a government registry or a property office. Once registered, it becomes a public record and forms part of the official land title of the property. If you compare between Registered Mortgage vs Equitable Mortgage, it is easier for the lender to enforce the Loan if it’s a Registered Mortgage. If you default on the Loan, the lender can act more smoothly through the legal system.

What is an Equitable Mortgage?

An Equitable Mortgage is a type of mortgage that doesn't require formal registration with the land registry but is still legally enforceable. The lender's security interest in the property is based on the borrower’s agreement to create a lien over the property, typically through a written contract. Enforcement of an Equitable Mortgage may be more complicated and require court involvement.

When to choose a Registered Mortgage?

A Registered Mortgage is typically the preferred option in the following circumstances -

• Registered Mortgage offers the most security to the lender, as it is formally recorded in the title.
• Registered Mortgages take priority over any subsequent claims on the property, which is crucial if the borrower defaults or if the property is sold or foreclosed.
• Registered Mortgages are easier to manage if the property is transferred or sold because the new owner or lender will have clear visibility of the outstanding mortgage.
• A Registered Mortgage simplifies enforcement because the lender’s claim is public, and they don’t need to go through extra steps to prove their interest in the property.

When to choose an Equitable Mortgage?

An Equitable Mortgage might be the better option in certain circumstances, such as -

• An Equitable Mortgage can be appealing if you want a cheaper, quicker solution. It may be used in situations where speed and lower costs are priorities.
• An Equitable Mortgage can sometimes be used in more flexible situations, such as in informal agreements or short-term Loans, especially when the borrower and lender are already in a trusted relationship.
• An Equitable Mortgage can still provide security without needing immediate registration. For instance, when you don’t plan to sell the property or transfer ownership soon.

Conclusion

The choice between Equitable Mortgage vs Registered Mortgage depends on your specific circumstances, including the Loan amount, the relationship between the parties, and the level of risk you're willing to take.