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Parameters |
Equitable Mortgage |
Registered Mortgage |
Registration |
The equitable mortgage does not need any registration. | Registration is mandatory under the registered mortgage. |
Process |
It is mandatory to purchase a stamp paper under the equitable mortgage. | To initiate the registered mortgage process, you, as a borrower, need to contact the office of the sub-registrar. |
Cost Involved |
Under this mortgage, the cost of stamp duty is either 0.1% of your home value or 0.2%. | You need to spend 5% of your home value to obtain a registered mortgage. |
Affordability |
Compared to a registered mortgage, an equitable mortgage is less expensive. | Registered mortgages are slightly more expensive. |
Lender's Rights |
In the event of default, the financial institution takes over your mortgaged home and auctions it to recoup its loss. | In the event of default, your mortgaged property is transferred to the financial institution, and they have the right to do whatever they want to do with the property; they can either sell it or use it. |
Risk |
In comparison to a registered mortgage, an equitable mortgage possesses a higher risk. | Since a registered mortgage provides security to both borrowers and lenders, it is considered risk free. |
Equitable mortgages and registered mortgages have the following similarities:
You pledge your property as collateral for the loan.
Both types of mortgages require interest pay on the loan amount
Equitable mortgage and registered mortgage require original property document
Lender has the right to sue the borrower in order to recover the loan amount
Key Factors to Consider When Choosing Between Registered and Equitable Mortgage
Banks and other financial institutions prefer registered mortgages over an equitable due to lack of records of the loan or the property in the sub-registrar's office.
This lack of registration makes it difficult for the lender to establish their legal rights over the property in case of equitable mortgage. Without a legally recognised mortgage, the lender faces difficulties in recovering their outstanding loan amount.
In contrast, a registered mortgage creates a public record of the mortgage and the terms of the loan, which provides greater legal protection and security. Here the registration process involves a thorough due diligence to ensure that the lender has a reliable asset to fall back on.
The decision of which type of mortgage is better - registered or equitable - depends on individual circumstances and needs. Registered mortgages offer greater legal protection and security for the lender, while equitable mortgages can be less expensive and more flexible.
When choosing between a registered mortgage and an equitable mortgage, consider your financial situation, risk tolerance, and goals. If you are looking for a lower cost mortgage option and are comfortable with higher risk, an equitable mortgage may be the better choice. However, if you value legal protection, security, and lower risk, a registered mortgage may be a more suitable option. Ultimately, the decision of which type of mortgage is better depends on a variety of factors, and it is important to carefully consider your options before making a decision.
Advantages | Disadvantages |
Lower cost compared to registered mortgages | Higher risk for both borrower and lender |
More flexible terms and conditions | No legal protection for lender in case of default |
Quick and easy process | Limited documentation and record-keeping |
Borrowers can access higher loan amounts | Limited transparency regarding terms and conditions of the loan |
Advantages | Disadvantages |
Greater legal protection for the lender in case of unpaid loan amount | Higher cost compared to equitable mortgages |
Lower risk for both borrower and lender | More rigid terms and conditions |
Full documentation and record-keeping | Longer process with more paperwork |
Transparency regarding terms and conditions of the loan | Borrowers may not be able to access as high loan amounts |
The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.
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