An immovable property is pledged as collateral for a loan under the terms of a mortgage, which is a legal contract. “A mortgage is the transfer of an interest in specific immovable 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,” states section 58(a) of the Transfer of Property Act, 1882.

The term “mortgagor” refers to the transferor, and “mortgagee” to the transferee. Real estate or other assets are used as collateral for mortgage loans.

Simply , a mortgage is an agreement between a person and, typically, a bank for the purpose of receiving a loan. The loan is utilized to purchase a property in which the lending party or bank has an ownership interest. The bank has the authority to either purchase the property outright or sell it to recoup the loan if the borrower fails to repay the loan in accordance with their agreement if they have an interest in the property.

Characteristics of Mortgage

1. A mortgage can be effected only on immovable property. The immovable property includes land and benefits arising from things attached to the earth like trees, buildings, and machinery. But a machine that is not permanently fixed to the earth and is shiftable from one place to another is not considered immovable property.
2. A mortgage is the transfer of an interest in the specific immovable property and differs from a sale wherein the ownership of the property is transferred. Transferring an interest in the property means that the owner transfers some of the ownership rights to the mortgagee and retains the remaining rights with himself. For example, a mortgagor retains the right to redeem the property mortgaged.
3. The object of transfer of an interest in the property must be to secure a loan or performance of a contract which results in monetary obligation. Transfer of property for purposes other than the above will not amount to the mortgage. For example, a property transferred to liquidate prior debt will not constitute a mortgage.
4. The property to be mortgaged must be a specific one, i.e., It can be identified by its size, location, boundaries, etc.
5. The actual possession of the mortgaged property need not always be transferred to the mortgagee.
6. The interest in the mortgaged property is re-conveyed to the mortgage on repayment of the loan with interest due on.
7. In case the mortgager fails to repay the loan, the mortgagee gets the right to recover the debt out of the sale proceeds of the mortgaged property