A mortgage is a form of security interest that arises over real property to secure a loan. It transfers certain proprietary rights to the lender (mortgagee) while the borrower (mortgagor) retains ownership. The mortgagee's rights are limited and allow enforcement only if the borrower defaults. Mortgages can be classified as transferring full ownership (mortgage stricto sensu), possession only (possessory security), or intangible rights (charge). Overall, a mortgage does not pass full ownership to the lender but rather confers certain rights over the property as security for repayment of the loan.

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Course Title: Property Law Waseem Ramzan
Assignmenttitle : “Mortgageand its essentials”
MORTGAGE
A mortgage is a form of security interest, commonly arising over real property. In essence, a
mortgage is simply a secured loan contract. It is relevant to property law because the
security interest actually confers a proprietary right upon the lender (the ‘mortgagee’) in the
secured property which is enforceable against the borrower (the ‘mortgagor’) where the
terms of the loan contract are breached and the lender must enforce his security interest.
Mortgages are one of the most common forms of security interests in existence. Most
people contemplating the purchase of a piece of property will do so with the assistance of a
loan, which is secured by a mortgage. It is important to appreciate exactly what type of
interest is transferred to the mortgagee upon executing the mortgage so that the difference
between an absolute title and a ‘security’ title is understood. Security is generally
understood to refer to any transaction whereby a lender, apart from holding personal rights
which are enforceable against the borrower, is given additional ‘security’ in the form of a
right which is exercisable against definable property. Security transactions are extremely
popular because they provide a lender with an additional sense of protection against the
possibility of a borrower being unable to repay the borrowed amount. A lender holding
nothing but an enforceable personal obligation against the borrower can be in a precarious
situation because of the possibility that, where a default occurs, the borrower may become
bankrupt or simply be unable to repay the amount borrowed. The advantage of a security
interest is that it places the lender in a much stronger position; the lender holds an actual
interest in the secured property, which is capable of being realised in circumstances where
the borrower is in default and the debt is incapable of being discharged by the borrower
personally. A security interest will be proprietary in nature where it confers upon the
mortgagee in rem rights which are enforceable against a specific and identifiable piece of
property. The mortgagee actually holds a proprietary interest in the property which is
capable of being alienated; however, this right cannot be realised until it is clear that the
mortgagor is in default of the primary obligation; the interest is only a ‘security’. The rights
of a security holder are not as absolute as those held by ordinary common law and
equitable estates and interests. This disparity has been well summarised by Sykes:
“ The security interest is therefore an aggregation or bundle of proprietary rights,
though not necessarily of ownership rights; that is, rights which habitually form part of the

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ownership bundle. It differs from other interests of a proprietary character in that the person
entitled always holds subject to the potentiality of the debtor either getting back her or his
property, or, as the case may be, coming to hold it free from the burden constituted by the
interest of a creditor… Even in those rare cases where the concept was that full dominion
passed to the creditor, as in the case of the Roman mortgage, the debtor still had at least a
contractual right to redeem”.
The holder of a security interest, whilst retaining a proprietary right which is enforceable
against the whole world, holds this interest subject to the defined purpose of the
transaction. A security interest holder can only enforce the right in circumstances where the
borrower fails to discharge the debt; this stems from the fact that the security interest is
only conferred upon the lender as a form of protection for the repayment of the loan.
Where the loan is properly repaid, there will be no further need for the security to exist, and
the interest may be discharged. Hence, the primary purpose of the security interest is to
operate for a limited period of time as a protective device; where the terms of the primary
debt are satisfied, there will no longer be any need for the security interest and the
mortgagor may ‘redeem’ the secured property.
Classification of security interests
Securities have traditionally been classified into three primary categories based upon the
old Roman division of transactions. These categories are fiducia, pignus and hypotheca.
Fiducia refers to security transactions where the actual proprietary interest is transferred
over to the lender for the duration of the loan. Pignus refers to security transactions where
possession of the property, but not actual ownership in that property, is transferred over to
the lender. Hypotheca refers to security transactions where the lender is not given
ownership or possession but, rather, enforceable rights against the property which may be
pursued where the debt is not repaid. This classification may be conveniently summarised
today as the mortgage stricto sensu, the possessory security and the charge. These three
types of security interests reflect the different forms of mortgages existing with respect to
old title land, Torrens title land and personal property.
1) Mortgage stricto sensu:
This type of security represents the classic form of mortgage. Under such a mortgage, the
mortgagee receives full legal ownership in the secured property for the duration of the
debt. Legal title to the secured property is transfer re dinto the name of the mortgagee
whilst the mortgagor retains a purely equitable interest in the property entitling him to
redeem the secured property once the debt has been fully satisfied. The interest retained by
the mortgagor is commonly referred to as an ‘equity of redemption’. In order for a
mortgage stricto sensu to arise, the legal title to the secured property must be properly
vested in the mortgagee; where the legal conveyance is ineffective, but it is clear that the
parties intended to create a mortgage, the transaction may be enforceable in equity.

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Once legal title to the secured property is properly vested in the mortgagee, he or she will
hold that title as security for the full and proper satisfaction of the debt. The mortgage
stricto sensu is the usual form of mortgage associated with general law land. Under the
Torrens system, however, a registered mortgagee will acquire a statutory charge in the
secured property, legal title remaining with the mortgagor. The ownership rights conferred
upon a mortgagee under a mortgage stricto sensu are similar to, but not as absolute as, full
ownership. A mortgagee can only exercise ownership rights in the event of a default in the
loan contract and, once the loan has been properly discharged, the mortgagor will have
both a contractual and an equitable right to redeem the secured property by transferring
legal title to the mortgagor. Furthermore, where a default in the loan contract entitles the
mortgagee to exercise rights against the secured property, the mortgagee cannot simply
assume full control over the property: in exercising security rights, the mortgagee is obliged
to consider not only his or her own interests in discharging the debt, but also the interests
of the mortgagor in the remainder or surplus of the property.
2) Possessory security:
A possessory security confers upon the lender the right to retain possession of property in
circumstances where a debt has not been repaid. This type of interest can only exist where
the lender holds actual possession or an enforceable right to possession, and is commonly
associated with chattels rather than real property. A possessory security may only arise
where the transaction relates to specifically identifiable property which has been actually or
constructively delivered into the hands of the lender. One of the classic forms of possessory
securities is the lien. The holder of a legal lien will have the right to retain possession of the
property until the debt has been discharged, but no right to exercise a power of sale is
conferred. A lien may be expressly created, but will usually arise automatically in the
particular circumstances of the transaction. A lien may be enforceable under common law
or it may be recognised by the equitable jurisdiction in circumstances where it would be
unfair to deny the security interest of a party within a particular transaction.
3) Charge:
A charge will confer upon the holder rights which are enforceable against the property if the
debt is not discharged, but it does not confer full ownership and a right to use, enjoy and
possess the property. As it is intangible in nature, a charge will subsist over property despite
the fact that the property may change hands although, as with other proprietary interests, it
is capable of being defeated by a bona fide purchaser for value without notice. The holder
of a charge may enforce his rights against the property in circumstances where the
borrower under the loan contract is in default, and the manner of such an enforcement will
be similar to other forms of security interest; a charge holder is obliged to take into account
the interests of the borrower when enforcing rights against the secured property. The
holder of an equitable charge holds a similar interest to that held by an equitable

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mortgagee, in the sense that both hold intangible rights which are enforceable against the
secured property. The difference between the two lies in the fact that a charge holder does
not have as extensive a range of remedies as the mortgagee because no right of foreclosure
exists. Traditionally, the remedy of foreclosure will only apply where a transaction is, in
substance, considered to constitute a mortgage rather than a pure charge. Under old title
land, a transaction is regarded as a mortgage ‘in substance’ where the parties execute a
transfer of the legal title for the primary purpose of securing a debt. Under Torrens title
land, where a mortgage is executed in the appropriate form and registered on the title, the
parties will receive all of the rights and obligations associated with mortgages. In summary
then, a charge is a lesser form of security interest because the range of remedies available
for its enforcement are not as comprehensive as those applicable to mortgages.

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Conclusion:
Cutting the long story short, mortgage is not passing of full dominium of property to
mortgagee by the mortgagor. But the interest in the immovable property as the security
with mortgagee for the loan taken or to be taken by the mortgagor .Section 58(a) of
Transfer Of Property Act ,1882 reads as,
“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.
The transferor is called mortgagor, the transferee a mortgagee; the principal money
and interest of which payment is secured for the time being are called the mortgage-money,
and the instrument (if any ) by which the transfer is effected is called a mortgage-deed.”
It is simply the secured loan contract .
References:
 Hepburn .Samantha, Principles of property law; Cavandish principles series, : 2nd
Edition, 2001, chapter no. 14th , pp no. 329 onwards.
 Sykes and Walker, The law of securities, 5th Edition , 1993, p 10
 Dr. Singh Avtar ,Textbook on The Transfer of Property Act, 4th Edition,2014, chapter
no. 4th ,p no. 198.