Mortgage and type of mortgage is specifically and important Banking Awareness topic and questions from the same can be asked in the General Awareness section for the various Government Exams.
In this article, we shall discuss in detail what is a mortgage and what are its different types and also how the questions based on this topic may be asked in the upcoming competitive exams.
Candidates willing to know what other topics are included in the Banking Awareness syllabus can visit the linked article for more information.
An Introduction To Mortgage
Before we learn about the different types of Mortgages, let us first discuss what is a Mortgage and what is its uses.
What is Mortgage?
When property, land or any other commodity is used as collateral to borrow money or to take a loan from a lender, it is known as Mortgage. In simpler terms, when a person borrows money from a lender (bank loans) and signs up an agreement where he/she gets cash in exchange for a real estate property as a guarantee with the bank until the entire amount is repaid is called a mortgage.
A few important pointers related to Mortgage have been given below:
- The borrower and lender both are uncertain about profit/loss in case of a mortgage. The lender is uncertain if the borrower will be able to pay the sum of money back or not and in case the borrower is unable to pay the lender back, he shall be in complete loss of the asset
- If the borrower is not able to pay back the loan amount, the lender has full authority over the mortgaged product
- The one who takes the loan is called a “debtor” and the one who lends money is called the “creditor”
- Loan is a contract between the lender and borrower when one lends money and the other borrows it at a certain rate of interest. Mortgage, on the other hand, is a type of loan in which the real estate or property element is added as a guarantee if the mount is not retired to the lender
Further below, we have discussed the different types of mortgages in detail for your reference.
Candidates preparing for the upcoming Government exams can refer to the below-mentioned links and test their preparation now:
Types of Mortgages
Discussed below are the different types of mortgages:
- Simple Mortgage: In such type of mortgage, the borrower needs to sign an agreement stating that if he/she is unable to pay back the borrowed amount in specified time duration, then the lender can sell the property to anyone to get his money back
- Mortgage by Conditional Sale: Under such mortgage, the lender can put a certain number of conditions which the borrower must follow in terms of repayment. These conditions may include the sale of the property if there is a delay in the monthly instalments, an increase in the rate of interest due to delay in repayment, etc.
- English Mortgage: In this type of mortgage, the borrower has to transfer the property in the name of the lender at the time of taking money, at a condition that the property would be transferred back to the borrower once the complete amount is paid back
- Fixed-Rate Mortgage: When the lender assures the borrower that the rate of interest will remain the same throughout the loan period is called Fixed-Rate Mortgage
- Usufructuary Mortgage: This kind of mortgage gives a benefit to the lender. The lender has the right over the property for the due course of the loan period, he can put the property on rent or use it for other purposes until the repayment of the amount. But the main rights lie with the owner himself
- Anomalous Mortgage: A combination of different types of mortgages is called an Anomalous Mortgage
- Reverse Mortgage: In this case, the lender lends money to the borrower on a monthly basis. The entire loan amount is divided into instalments and the lender gives the borrower that money in instalments
- Equitable Mortgage: In this type of mortgage, the title deeds of the property are given to the lender. This is a common phenomenon in the banking mortgage loans. It is done to secure the property
Aspirants must go through the above mentioned different types of mortgages and prepare accordingly for the upcoming Government exams.
Different Types of Mortgages – Sample Questions
A few sample questions based on the types of mortgages have been given below based on the format followed by the various competitive exams.
Q 1. Under which of the mortgages, the lender gives money to the borrower in the form of instalments?
- Reverse mortgage
- Anomalous mortgage
- Equitable mortgage
- Usufructuary mortgage
- Lend Back mortgage
Answer: (1) Reverse mortgage
Q 2. A man mortgaged his 2 BHK flat to a money lender in return of a sum of money and the lender decided to let the flat on rent. This is an example of which type of mortgage?
- Equitable Mortgage
- Usufructuary Mortgage
- English Mortgage
- Fixed Rate Mortgage
- None of the above
Answer: (2) Usufructuary Mortgage
Q 3. The one who mortgages his/her property is also known as _______
- Mortgagee
- Lender
- Creditor
- Debtor
- None of the above
Answer: (4) Debtor
Q 4. If the lender sells the mortgaged property if the borrower is unable to repay the loan by the decided date, this type of mortgage is called _________
- English Mortgage
- Simple Mortgage
- Sale Mortgage
- Mortgage by Conditional Sale
- Anomalous Mortgage
Answer: (2) Simple Mortgage
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