Equitable Mortgage vs Registered Mortgage: Know the Difference

Knowing the distinctions between equitable and registered mortgages is essential when applying for a loan with property as security. While both act as loan security, they differ in costs, procedures or legal ramifications. The main distinctions between an equitable mortgage and a registered mortgage are outlined here.

What is an Equitable Mortgage?

A more straightforward and less formal way to create a mortgage is through an equitable mortgage. This is how it operates:

Procedure and Record-keeping:

• Title Deed Deposit: The borrower gives the lender the original title deeds to the property as collateral for the loan. No official paperwork or registration is required.
• Legal Recognition: The mortgage is enforceable in courts and recognised by equity law, even though it is not registered.
• Simplicity: Since there are no official registration fees or stamp duty to pay, the process is simple, fast and less expensive.

Advantages:

• Economical: Reduced expenses because there is no stamp duty or registration fees.
• Quick Process: Since there are no extensive paperwork requirements or legal procedures, the processing time is quicker.
• Confidentiality: Since no public documents are involved, the transaction is more private.

Disadvantages

• Limited Legal Standing: Compared to a registered mortgage, proving the mortgage could be more difficult in a dispute.
• Fraud Risk: Because the mortgage is not publicly disclosed, there is a greater chance that the borrower will try to obtain more than one loan on the same property.

Mortgage Registry

A registered mortgage, sometimes called a legal or formal mortgage, involves a more systematic and legally binding procedure.

Procedure and Record-keeping:

• Formal Agreement: A mortgage deed, a formal document outlining the terms and circumstances of the mortgage, is signed by the borrower.
• Registration: To ensure that the mortgage is publicly recorded, the deed is registered with the relevant government body, such as the land registration unit.
• Legal Standing: In the event of a default, it will be simpler to enforce the registration due to its solid legal standing.

Advantages:

• Legal Security: A robust legal position and more straightforward enforcement in the event of noncompliance are needed.
• Transparency: Making the registration public lowers the possibility of fraud and gives unambiguous proof of the mortgage.
• Many Mortgages: When there are several mortgages, the registered mortgage often has precedence over the unregistered ones.

Disadvantages:

• Increased Costs: This entails increased costs due to legal fees, stamp duty, and registration fees.
• Time-consuming: The requirement for official papers and registration makes the process more time-consuming.
• Less Confidential: The transaction is not private because it is a public record.

Difference Between Equitable Mortgage and Registered Mortgage

The below table highlights some of the key differences.

In Summary

Depending on your needs and situation, you may decide between a registered mortgage and an equitable mortgage. Consider an equitable mortgage if you're looking for a quick, affordable fix and are okay with the informality of the process. However, a registered mortgage is preferable if you want robust legal protection and are prepared to pay the extra fees.

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