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What is a Mortgage Deed? - Meaning, Types & Key Elements

Dec 12, 2023
What is a Mortgage Deed? - Meaning, Types & Key Elements

As a property owner, you can unlock various credits using your property as collateral. The loan amount is based on the value of your property, which ultimately provides an easily accessible financing option with reasonable rates.

However, such loans can only be secured by a mortgage deed granting the lender certain rights. The lender can claim and sell your property to recover the amount owed in case the borrower cannot repay the loan amount.

In the following sections, we will learn more about the meaning of mortgage deeds, the different types, and their key elements.

What is Mortgage Deed?

For those availing loans against collateral, you may want to understand “what is a mortgage deed?” These documents serve as a valuable legal instrument that gives the lender the right to auction/sell the mortgaged property when a borrower defaults on clearing the outstanding loan amount. A mortgage deed safeguards the lending institution against the risk of insolvency.

The mortgagor, who owns the property, seeks a loan, while the mortgagee (lending institution) offers to lend against the said collateral (property). The terms of the loan are all outlined in the mortgage deed. Registration is necessary to ensure the legal validity of the document, which involves both parties' signatures, witnesses, and payment of stamp duty. This process legitimises the record and makes it legally binding.

How Does a Mortgage Deed Work?

Mortgage deeds let lending institutions use a borrower's property as security for a loan. In default, the lender can claim property ownership to recoup their losses. Before finalising the loan, both parties agree on key terms such as the loan amount, duration, monthly payments, and interest rates. It is imperative to record the deed at a registry office. When the borrower successfully repays the loan, the lender's claim on the property is released.

Importance of a Mortgage Deed

Here are some reasons why understanding the importance of a mortgage deed is essential:

When property owners require a loan using their property as collateral, the mortgage deed plays an important role. This legal agreement is essential for protecting the interests of both parties by accurately identifying the borrower and lender.

In the event of the borrower's inability to fulfil their obligations, the mortgage deed allows the lending institution to claim the property and enforce their legal rights. Additionally, the mortgage deed thoroughly examines the title and ownership of the property, ensuring that only the rightful owners are involved in the transaction.

Overall, the mortgage deed is indispensable for ensuring a smooth and secure transaction for property owners and lenders.

Types of Mortgage Deeds

Let's look into the types of mortgage deeds, aiming to shed light on the diverse mechanisms through which real estate transactions are secured:

Simple Mortgage Deed

The most common type of mortgage deed allows the borrower to maintain possession of the property while transferring title to the lender as collateral for the loan. However, the lender can auction/sell the property to recover costs in the event of default by the borrower.

2. Usufructuary Mortgage Deed

Here, the borrower surrenders possession of the property to the lender in lieu of interest payments. The lender can utilise the income generated by the property until the loan is repaid, after which the property is returned to the borrower.

3. English Mortgage Deed

In an English mortgage, the lender gains legal property ownership while the borrower maintains equitable rights. The borrower can regain the legal title to the property after repaying the loan in full.

4. Mortgage by Conditional Sale Deed

The concept of a mortgage by conditional sale is a unique form of loan that resembles a property sale but offers the option to repurchase. If the borrower is unable to make payments, the lender assumes ownership. Conversely, once the borrower fulfils their payments, they can reclaim the property.

5. Mortgage by Title Deed Deposit

Here, the borrower hands the title deed to the lender as collateral without giving up possession of the property. Once the loan is paid off, the deed is returned to the borrower. This unique arrangement provides security for both parties involved.

6. Anomalous Mortgage Deed

An anomalous mortgage is a non-standard mortgage that doesn't fall into any of the traditional categories. It is a blend of various mortgage options and adheres to the specific terms negotiated between the borrower and lender.

7. Commercial Mortgage Deed

This type of mortgage deed is designed particularly for commercial assets, including retail spaces, office buildings, or industrial facilities. The loan terms are generally shorter, but with higher loan amounts.

Key Elements of a Mortgage Deed

Having clear knowledge of the terms and conditions of a mortgage deed helps make informed decisions without leaving room for ambiguity. The different key elements of a mortgage deed are listed below:


Accurately identifies both the mortgagor and mortgagee, ensuring that they have the necessary legal capacity to agree following the Indian Contract Act of 1872.

Property Details

Provides a thorough description of the property, including its specifications, value, location, value, and pertinent facts.

Repayment Covenant

This specifies the terms, duration, and conditions for loan repayment.

Mortgage Clause

This fully details the type of mortgage being entered into and the corresponding obligations for both parties.


This section dictates the possession rights following the type of mortgage chosen; for a simple mortgage, the borrower retains possession, while a usufructuary mortgage transfers possession to the mortgagee.

Title Deeds

The Title Deeds section specifies the specific title deeds that the mortgagor is required to provide to the mortgagee.

Required Documents

This clause outlines critical documents (such as an Aadhaar card, PAN card, passport, etc.) needed for the mortgage agreement.

Redemption Clause

This specifies the duration of the mortgage, the requirements for paying back the loan, and the procedure for redeeming the property upon successful repayment.


If the mortgagor is insolvent (unable to pay off debt), this addresses the protocol for handling the mortgaged property.


The Habendum clause clearly outlines the nature and extent of interest held by each party in the property.

Why is a Mortgage Deed necessary?

The importance of the mortgage deed cannot be overstated. When it comes to outlining the rights and obligations of the lender and borrower in a mortgage contract, this document provides legal protection for the lender in case of payment defaults or delays. Still, it also clearly outlines the specific terms of the loan, such as interest rates and property ownership.

With the ability to exercise foreclosure in the case of contract breaches, the mortgage deed guarantees the lender's secure claim over the property. Additionally, it solidifies the transfer of ownership per the agreed-upon terms. Therefore, the mortgage deed is an essential document that offers legal clarity and safeguards for all parties involved in a mortgage agreement.

When do you need a Mortgage Deed

A mortgage deed may be warranted for the following reasons:

  • Establishes Ownership: The mortgage deed serves as proof for borrowers to prove their legal property ownership.
  • Secures Lender's Rights: It provides legal authorization for lenders to reclaim the property if the borrower defaults.
  • Essential for Transactions: Including clauses that protect the lender's rights in loan agreements, especially when transferring property interest, is crucial to ensure legal recourse if the borrower cannot fulfill their obligations.
  • Safeguards Interests: Ensures protection for both lender and borrower in case of loan default.
  • Repayment Security: Acts as a secure source of repayment for lenders if the borrower fails to adhere to loan terms, providing reassurance in the lending process.


The mortgage deed is an essential element of property transactions as it sets out the specific details of the agreement, thereby safeguarding both the lender and borrower. It promotes a secure and transparent lending process and serves as a guide for responsible property transactions. With that being said, if you're in the process of property ownership or contemplating a home purchase, consider integrating SMFG Grihashakti's home loan solutions into your financial strategy. With flexible repayment terms, competitive interest rates, a 100% online application process, and numerous other benefits, we can be your trusted partner in this journey.


What does a mortgage deed mean?

A mortgage deed is a legal document that transfers the title of a property to a lender as collateral for a loan. It outlines the terms and conditions of the mortgage, including the loan amount, interest rate, repayment schedule, and penalties for default.

What is the difference between a sale deed and a mortgage deed?

A sale deed facilitates the transfer of property ownership between individuals. Here, the buyer becomes the new owner of the property. On the other hand, a mortgage deed serves as a security document for a loan. Here, the borrower retains ownership, but the lender holds a lies on the property.

What is the validity period of the mortgage deed?

A mortgage deed is typically valid as long as the loan term is in effect. Once the loan is fully repaid, the mortgage deed is discharged, and the property title is entirely handed back to the borrower.

What are the advantages of a mortgage deed?

A mortgage deed offers several advantages, such as:

  • Access to higher loan amounts.
  • Better financial flexibility.
  • Tax benefits.
Who is the legal owner of a mortgaged property?

Although the lender holds a lien on the title, the legal owner of a mortgaged property is still considered the borrower. However, in the event of default on the loan, the lender can claim the property.

Is an unregistered mortgage deed valid?

It is generally understood that an unregistered mortgage deed lacks validity. Registering the deed is important as it solidifies the lender's legal right to the property and safeguards their interests in potential scenarios such as bankruptcy or legal conflicts.

Which mortgage does not require registration?

An equitable mortgage, also called a non-possessory mortgage, does not require any registration. Yet, it is less widely used and may be less desirable for lenders than a registered mortgage.

Which document is very necessary for a mortgage?

The documents necessary for a mortgage include:

  • Proofs of identity;
  • Residential proof;
  • Income statements;
  • Evidence of employment;
  • Details of property.

Disclaimer: *Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG Grihashakti. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG Grihashakti’s policy at the time of loan application. If you wish to know more about our products and services, please contact us.

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