Equitable mortgage are most important for a business man and it has some great advantages but there also some disadvantages of equitable mortgage. Here we mention some advantages and disadvantages of equitable mortgage.
Advantages of Equitable Mortgage
- Economical 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. Charge can be created simply by 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 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 regarded 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 comparative supremacy of advantages over disadvantage, equitable mortgage is popular.
A prudent banker may safeguard his interest by taking necessary precautions against the probable risks.
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