To understand a home equity mortgage, it is essential to know the forms of mortgages. In case of a simple mortgage, the mortgagor binds himself personally to pay the mortgage money. He does not give possession of property but agrees, expressly or impliedly, that if he fails to pay according to his contract, the mortgagee shall have the right to cause the mortgaged property to be sold and the proceeds of the sale applied to payment of the mortgage money to the extent necessary.

It is worth pointing out that the words “cause the mortgaged property to be sold” mean that the mortgagee shall have to seek the intervention of the law for selling the mortgaged property. He himself is not authorized to sell the property. As the possession over the property remains with the mortgagor, such mortgage is called non-possessory. The mortgagor takes upon himself a personal obligation to repay the amount, failing which the mortgagee gets two options -- to apply to the court for permission to sell the mortgaged property, or to file a suit for recovery of the whole amount without selling the property.

Then there exists a mortgage by conditional sale. Under this form of mortgage, the mortgagor ostensibly sells the mortgaged property with certain conditions. Firstly, that the sale shall become absolute if the mortgagor fails to pay the mortgage money on a certain date. Secondly, that the sale shall become void if the mortgagor pays the mortgage money, and finally, that the buyer shall transfer the property to the seller if the latter makes payment of the mortgage money on a certain date.

From the above conditions, it can be noted that all the conditions imply the same thing, i.e., on default of payment of the mortgage money, the mortgaged property shall be treated as sold to the transferee. It is, however, essential that such conditions must be embodied in the mortgage deed.

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