A mortgage is a legal or equitable conveyance of title as a security for the payment of debt or the discharge of some other obligation for which it is given, subject to a condition that the title shall be reconvened if the mortgage debt is liquidated.
The conveying party or the obligor is called the mortgagor, the lender or oblige who obtains interest in the security is called the mortgagee, and the debt for which the security is created is called the mortgage debt.
Although a mortgage may be created over land or chattels, land provides a reliable and invaluable security for loans and advances in modern times.
Unlike most properties, land titles are usually represented on title Deeds, registers of title or instruments so that the creditor is protected either as a registered incumbrancer, holder of an overriding interest on registered land or holder of the title Deeds to the mortgagor’s unregistered estate.
Physical control of the property is hardly necessary and its characteristic feature of immovability affords the creditor a reassuring grip on the security.
In time of inflation with the attendant fall in money value, land appreciates in value to compensate a creditor who decides to sell mortgaged property after foreclosure of equity of redemption.
A mortgage must be distinguished from other forms of security like pledge, lien or charge in that a mortgage is essentially a proprietary security.
The substance of the mortgage is a right of property vested in the mortgagee, which entitles the latter by virtue of this title to have the rents and profits applied to satisfy his debt and, if necessary, pay himself off by realizing his security through sale or foreclosure.
Distinguishing between a mortgage and a pledge, Cotton L-J- said in the Re Morritt that:
A pledge as a rule is and must be accompanied by delivery of possession.
It is out of the possession given under the contract that the pledgee’s right spring. A mortgage… involves in its essence, not the delivery of possession, but a conveyance of title as a security for the debt.