What is mortgage

What is Mortgage?

Learn about Mortgage with Anil Kapoor
Om Jai Jagdish 2002

Movie Case Study

The scene shows Om Batra having a conversation with Anchit. She informs him that his house which was mortgaged by him is no longer his property. Om had taken a loan from Shekhar and mortgaged his house. In this blog, Learning Perspectives will explore the meaning of Mortgage.

What is Mortgage?

A mortgage is a type of a loan. A loan that is taken either for purchasing home, land or real estate. These loans are generally given by financial institutions, banks and certified lenders. Banks and financial institutions generally ask for a collateral to support the loan. Hence, a mortgage loan is also called a secured loan.

There are two parties in the loan process i.e. borrower and the lender. In the above case, Om is the borrower and Shekhar is the lender. The borrower generally agrees to pay the loan over a period of time or in installments (Equated Monthly Installments). These EMIs are accompanied by interest.

In the movie, Om had taken a loan for the education of his brother from his friend Shekhar. Shekhar drafted the loan agreement, which Om signed. When Om failed to pay installments of the loan, Shekhar took over Om’s house.

How does a Mortgage work?

Individuals and businesses use mortgages to buy properties. They make the down payment while the rest of the amount is paid in installments. Mortgage applications are the most crucial element while granting a loan. Banks and financial institutions check for various criteria before granting a loan. For businesses, documentation is different from an individual.

Once the borrower agrees with the deal the lender. The lender checks the various documentation and determines whether the borrower would be able to pay back the loan. After a thorough check by the lender, a loan is granted to the borrower.

Type of Mortgages

Simple Mortgage

As the name suggests this is the simplest loan mortgage. Borrower mortgages the asset to avail of the loan.

English Mortgage

Under this mortgage, the asset is transferred to the lender at the time of taking the loan. It will be transferred back to the borrower after the payment of the entire loan amount.

Commercial Mortgage

For individuals and businesses who buy commercial property such as a shop, this mortgage is applicable to them.

Mortgage by title deed deposit

This mortgage means depositing the title deed with the lender to take the loan.

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