What Is Mortgage And What Are Its Characteristics?

In the post war era the commercial banks have started lending or immovable property which includes land, and building. The borrowers transfer the interest in property to the bank for obtaining loans. On repayment of the debt the immovable property is reverted to the borrower. The transfer of interest in specific immovable property for the purpose of securing loan is called mortgage.

Mortgage is defined as the transfer of interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loans and existing or future debt, or the performances of an engagement which may rise to pecuniary liabilities. The lending of money on real estate is not popular with the commercial banks. The loans on real estate lack liquidity. In case of default there is no organized market where the property can be sold and the amount recovered to pay off the loan.

There are many reasons for unpopularity of real estate with bakers as security. Real estate on the face of it, appear to be sound security however in some cases, the transfer of property may involve legal hindrances of succession. The bank then shall have to face difficulty in the recovery of the advances.