Mortgage Legal Definition

The transfer of title to real land done to insure the execution of some act by the person making the transfer, such as the payment of money.

The transfer of title to real land done to insure the execution of some act by the person making the transfer, such as the payment of money. Upon completion of the act, the grantee undertakes to return the property to the person who originally gave it to him.

Mortgages of Various Types

Mortgages are classified into two types based on the kind of property mortgaged: mortgages of lands, tenements, and hereditaments, or mortgages of goods and chattels; and mortgages of legal and equitable title to the object mortgaged.

In equity, all types of property, real or personal, capable of an absolute sale, may be mortgaged; rights in remainder and reversion, franchises, and choses in action may thus be mortgaged; but a mere possibility or expectation, such as that of an heir, cannot.

A legal mortgage of lands is a conveyance of lands by a debtor to his creditor as a pledge and security for repayment of a sum of money borrowed, or performance of a covenant with the proviso that such conveyance shall be void on payment of the money and interest on a certain day, or performance of such covenant by the time appointed, by which the conveyance of the land becomes absolute at law, but the mortgagor has an equity of redemption,

It is a general law in equity that once a mortgage, always a mortgage; any effort to resist the equity of redemption must thus fail.

How to Identify the Type of Mortgage

In terms of form, when it is meant to confer legal title, such a mortgage must be in writing. It is either in a single deed that includes the whole contract, or it is in many deeds

and which is the normal form – alternatively it is two independent documents, one with an absolute conveyance and the other with a defeasance. However, whatever restrictions or covenants contained in a conveyance, even if they seem to indicate an absolute disposal or conditional purchase, a court of equity will always view it as a mortgage merely, or pass an estate redeemable. Because mortgage money is rarely paid on the appointed day, mortgages are now entirely subject to the court of chancery, where it is an established rule that the mortgagee holds the estate merely as a pledge or security for the repayment of his money; thus, a mortgage is considered in equity as personal estate. The mortgagor is regarded the genuine owner of the property, with the debt as the principle and the land as an accessory; when the debt is discharged, the mortgagee’s interest in the lands determines of course, and he is looked on in equity as a trustee for the mortgagor.

Land Equitable Mortgage

An equitable mortgage of lands is one in which the mortgagor does not surrender the land on a regular basis, but instead does some act that demonstrates his intention to bind the same for the security of a debt he owes. An agreement in paper to transfer an estate as security for the return of a quantity of money borrowed, or even a deposit of title documents, will have the same effect as generating an equitable mortgage as a verbal agreement.

Goods Mortgage

A mortgage of goods differs from a simple pawn. The whole legal title transfers conditionally to the mortgagee through a grant or conveyance of goods in gauge or mortgage, and if not redeemed within the period specified, the title becomes absolute at law, but equity may intervene to force a redemption. However, with a commitment, only the pledgee receives the special property, while the pledger retains the generic property. There have been occasional incidents of chattel mortgages being found legitimate in the absence of real ownership in the mortgagee; however, these decisions stand on highly unusual grounds and may be considered exceptions to the general norm.

Sale with Restrictions

It is important to note that a conditional sale with the opportunity to repurchase closely resembles a mortgage; yet, they are separate. The transaction is considered to be a mortgage if the debt persists, but a conditional sale if the obligation is erased by mutual consent, or the money provided is not borrowed, but the grantor has a right to repay it in a set period and have a reconveyance. In the event of a dispute, however, courts of equity will always rule in favour of a mortgage.