Equitable mortgages are most important for a businessman and it has some great advantages but there also some disadvantages of equitable mortgages. Here we mention some advantages and disadvantages of equitable mortgage.
Advantages of Equitable Mortgage
- Economic process: It does not require registration; therefore, stamp duty is saved. It is thus economical.
- No security risk: No witness is required, and as such information regarding the mortgage remains confined to the banker and the customer, thus secrecy can be maintained.
- Less document charge: It is simple as no elaborate drafting of mortgage deed is required. The charge can be created simply by the deposit of title deeds with the mortgage.
- Confers on the mortgagee: It confers on the mortgagee the same remedies as are available in case of legal mortgage.
Disadvantages of Equitable Mortgage
- Time-consuming procedure: Property mortgaged can be realized, when required, only through the court’s order. This is a time-consuming as well as an expensive process.
- The mortgagee has to be extra-cautious: In no case, he should part with the title deeds. In case the mortgagee hands over the possession of documents to the mortgagor, a subsequent mortgagee who has in good faith accepted the documents will have a prior claim. The banker should be very careful in this regard and should not part with the documents of title in any case. If the mortgagor desires to inspect or to show such documents to somebody else, he should be permitted to do so either in the bank premises or in the presence of the banker’s lawyer.
However, on account of the comparative supremacy of advantages over disadvantages, the equitable mortgage is popular.
A prudent banker may safeguard his interest by taking necessary precautions against the probable risks.
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