Mortgage Defined, and the Six Kinds of Mortgage

In one line

A mortgage is the transfer of an interest in a particular piece of immovable property to secure a loan, and the Act recognises six ways of doing it.

In exam wording: section 58(a) provides that a mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.

Why the definition is worded so carefully

Every phrase in section 58(a) is doing work, and the examiner tests them one at a time.

"Transfer of an interest." Something real passes to the lender. That is what makes a mortgage more than a promise to repay: the lender has rights in the property, not merely against the borrower. It is also what distinguishes a mortgage from a charge under section 100, where no interest is transferred.

"An interest", not the whole. The mortgagor keeps the rest. What he keeps is the equity of redemption, his right to get the property back on paying, and it is his most valuable remaining asset. That idea governs the whole of the next chapter, [The Right of Redemption, and Clogs on It].

"Specific immovable property." The property must be identified. A general promise that "my assets" answer the debt is not a mortgage.

"For the purpose of securing." The transfer is security, not payment. The lender is not buying the property; he is holding an interest in it until he is repaid.

What may be secured is drawn widely: money already advanced, money to be advanced in future, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. So a mortgage may secure a guarantee or an obligation that has not yet crystallised into a debt.

The vocabulary, defined in the same clause: the transferor is the mortgagor, the transferee the mortgagee, the principal money and interest secured for the time being are the mortgage-money, and the instrument, if any, by which the transfer is effected is the mortgage-deed. The words "if any" matter: one kind of mortgage needs no instrument at all.

The six kinds

(b) Simple mortgage

No possession. The mortgagor binds himself personally to pay the mortgage-money, and agrees expressly or impliedly that on default the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds applied, so far as necessary, in payment of the mortgage-money.

Two features define it: a personal covenant to pay, and a right to have the property sold, which must be through the court. The mortgagee gets no possession and cannot foreclose.