equitable mortgage

An equitable mortgage is a mortgage whereby the mortgagee does not acquire the legal estate in the property which is the subject of the mortgage - the mortgagor acquires an equitable interest in the property. All mortgages which are not legal mortgages are equitable. Thus an instrument creating a mortgage which does not satisfy the requirements of the Law of Property Act (1925) or because the instrument does not satisfy formal requirements for a legal mortgage will be equitable.

As a general principle, any real or personal property which is able to be made the subject of a legal charge is able to be the subject of an equitable charge.

Creating Equitable Mortgages

An equitable mortgage may be created by handing the deeds of title in property to another person in exchange for a loan, provided there is some writing evidencing the transaction. The lender may thereby acquire an equitable mortgage over the property specified by the deeds of title. There is no writing in such a transaction, and therefore the transaction cannot satisfy the formal requirements for a legal mortgage. Also, a beneficiary to a trust may only grant an equitable mortgage over trust property.