Published on Sept 3, 2020Updated on Oct 21, 2026
When we buy a house, we can either make a down payment or take a loan to make the payment. When we take a loan, most of the time the bank mortgages our property. It simply means they are in possession of our property until we repay the loan. In the event that we fail to repay the loan, the bank can auction the property off to a third party. Despite its slightly complicated definition, most of us have heard of the term mortgage. However, few of us know of the terms equitable mortgage or registered mortgage.
Before we understand the key differences between the two terms, it is important to understand the definition and meanings of the two types of mortgages.
Equitable mortgage is a type of mortgage where the terms of the agreement are made solely between the mortgagor and the mortgagee. There is no third party or government agency involved. The term “equitable mortgage” is derived from the word equity which in this context means in the interest of justice.
In this type of mortgage it is necessary to take the approval of the sub-registrar to finalize the agreement. Thus, the mortgagee and the mortgager agree to abide by a certain set of terms and conditions for the tenure of the loan which is set by a third party.
|
Factors |
Equitable Mortgage |
Registered Mortgage |
|
Meaning |
A type of mortgage, where the terms of the agreement are made solely by mortgagor and mortgagee. They are not registered. |
The mortgagor and mortgagee need to take the approval of the sub-registrar to finalize the agreement |
|
Process |
The buyer of the property has to buy the stamp paper |
The borrower has to approach the sub-registrar’s office to purchase the stamp paper |
|
Cost/Stamp Duty |
The stamp duty ranges between 0.1-0.2% of the total loan amount or the home value |
The stamp duty is nearly 5% of the loan amount or the home value |
|
Lender’s Right |
In case of non-payment of the loan amount, the lender takes over the property and place it for auction |
In case of non-payment of the loan amount, the lender can do whatever it wants to do with the property |
|
Risk Factors |
The risk is higher as both parties are only bound by the agreement |
The risk is low as there are legal provisions for both borrower and the lender |
Please note that the above is for your information only. Mortgage loans at SMFG India Credit are provided based on the applicant’s eligibility and the policy of SMFG India Credit at the time of loan application. Loans are at the sole discretion of SMFG India Credit.
Now that we have understood the terms, let us look at the similarities and differences.
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The similarities between the two mortgages are that in both cases the bank takes your original documents and returns them only when you repay the loan. In both cases, the lender has a right to sue for non-payment
Now that we know the key differences between the two terms, let us understand which one would work for you based on certain key parameters.
Now you know that the registered mortgage is preferred over the equitable mortgage, you would wonder where one should take an equitable mortgage? After all, it is cheaper and the right to sue is available to both parties.
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If your loan is very high or you buy a property in tier 3 or tier 4 city or you have deep trust in the other party, then it is wise to go for an equitable mortgage.
This blog has explained to you the similarities, differences, the pros and cons of the two different types of mortgages. Both have their advantages and disadvantages.
In conclusion, whether you go for an equitable or registered mortgage make sure your money stays safe.
Important Note: This article is for general informational purposes only and may be subject to change from time to time. As product features, eligibility criteria, interest rates, charges, fees, tenures and other terms may be revised as per SMFG India Credit's policies, readers are advised to refer to the latest details from the respective product pages (please select from the top menu). For the latest loan charges, please visit Charges & Fees Link and for the latest Interest rates, please visit Interest Rate Rationale. Please note that final loan terms, disbursement process and eligibility criteria will depend on SMFG India Credit's policies at the time of loan application.
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