A Loan Against Property, or mortgage, can offer substantial access to funds for various financial needs by leveraging your real estate asset. A registered mortgage can help you manage both urgent and planned expenses without depleting your savings. Typically, such mortgages have a legal framework that protects the lender’s interest in the pledged property. Usually, a public notice is issued to protect the lender's investment, ensuring that the property doesn’t get sold or transferred without complete loan repayment.

Continue reading to learn more about the meaning of a registered mortgage and how it works. 

What Is a Registered Mortgage?

Also known as the “Deed of Trust,” a registered mortgage is a loan agreement between the lender and the borrower with legal standing. A sub-registrar enforces this agreement after verifying the mortgage deed and legally recognises the lender’s interest in the collateral property.

A registered mortgage prioritises lenders' interest in the pledged property, allowing them to sell it in case the borrower fails to repay the loan amount. After successful loan repayment, the lender cannot exercise any claim on the pledged property.

Types of Mortgages

The most common types of mortgages are registered and equitable mortgages:

1. Registered Mortgage

This type of mortgage requires legal formalities like the official registration of the mortgage deed. It also entails costlier stamp duties and is more time-consuming than equitable mortgages. However, registered mortgages tend to be more secure, protecting the interests of both parties.

2. Equitable Mortgage

Equitable mortgages are strictly a mutual agreement between the lender and the borrower and don’t require legal registration. In this case, the borrower also uses property as collateral to secure loan funds. Equitable mortgages may not involve a transfer of ownership and are more flexible than registered mortgages since the loan terms are mutually decided by the parties. However, such types of loans are risk-driven as they don’t involve legal registration with government entities.

How Does a Registered Mortgage Work?

The lender and the borrower have to sign a mortgage deed and register it with the sub-registrar’s office. The mortgage deed is in the public domain, legalising the lender’s claim on the property in case of nonpayment. The lender will continue to hold this claim until the loan is fully repaid, after which the lender’s interest in the property is exhausted.

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Importance of a Registered Mortgage

Here’s why registered mortgages play a significant role in property financing:

• Legally established and provides mutual benefits and security to lenders as well as borrowers.
• Registered mortgages don’t imply a transfer of ownership. They simply allow lenders to legally register their claims. The lenders can only sell when the borrower fails to comply with the stipulated loan terms.
• The mortgage deed is in the public domain, which further makes this type of borrowing more transparent and secure. As a result, lenders feel more confident in their investments and may be amenable to offering lower interest rates (depending on lender policies).

What Is the Process of Registering a Mortgage?

Here’s a general process involved in registered mortgage applications:

• Fill out a mortgage loan application form.
• Supplement your application with all the required documentation.
• The lending institution will then verify the information and assess the value of the pledged property.
• After successful verification, a mortgage deed is prepared, which outlines the loan terms and conditions, including loan amount, interest rates, monthly repayments, and other associated costs.
• You’ll need to pay stamp duty and registration fees before mortgage registration.
• Then, you need to visit the nearest registrar's office with witnesses to legally validate the mortgage deed.
• Following the complete submission and verification of the needed documents, your mortgage will be registered.

Documents Required for a Registered Mortgage

To apply for a registered mortgage, you may need to submit the following documents:

• A completed application form with recent photographs.
• Proof of Age & Identity: Passport, Aadhaar card, voter ID, PAN card, or driving licence.
• Address Proof: Utility bills, rental agreements, or a ration card.
• Financial Documents: Bank statements, income tax returns, and salary slips. Self-employed individuals typically need to provide CA-audited financial statements. 
• Property Documents: Documents proving property ownership, like the Title Deed.
• Encumbrance Certificate: This gives insights into the liabilities associated with the property.

Conclusion

Registered mortgages significantly reduce the risk of borrowing by making the lender’s claim on the property clear and indisputable. The level of legal protection makes registered mortgages more secure than equitable mortgages. Before committing, be sure to compare different lender options and carefully read the terms and conditions.

If you’re exploring Loan Against Property options with flexible repayment tenures and attractive interest rates, SMFG Grihashakti can help. Use our LAP eligibility calculator to estimate the maximum loan amount you may be able to borrow and apply online today.