Monday, April 15, 2019

What is mortgaging and what are the Costs involved in mortgaging

Author: Sachin Gupta | Find me on Twitter

These days, buying a house has become relatively easier in India because of evolution of the housing finance sector.  While cost of buying a property has surged, the availability of housing finance has helped middle class buyers to own their dream home. In order to avail housing finance, a buyer typically mortgages his/her property with the lender. A mortgage therefore is a method of using property for the payment of debt.

The provisions relating to mortgage of property are contained under Sections 58 to 104 of the Transfer of Property Act 1882. Section 58 of the Act specifically defines the meaning of mortgage and other related terms, according to which, mortgage means the transfer of an interest in specific immovable property for the purpose of securing payment of money advanced or to be advanced, by way of loan or an existing or future debt. The transferor is called a mortgagor, the transferee a mortgagee, the principal money and interest of which payment is secured is called 'mortgage money', and the instrument by which transfer is affected is called a mortgage deed.

A property can also be mortgaged with the lender for securing a loan for the purposes other than owning a home. Therefore, mortgage is simply a loan against property. Lender charges interest rate from the borrower on the outstanding principal. Borrower is supposed to make a monthly payment to pay the interest charges as well as clear off part of principal amount. Failing to make monthly installments can lead to repossession of property by the lender.

The tenure for which loan is secured by the borrower is pre-decided by lender and borrower at the time of sanctioning of loan. Usually, the tenure of a typical home loan is 20 years because houses tend to be expensive. There are various charges that are involved in availing a home loan from the lender. Find below the list of these charges:







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