An equitable mortgage is one which does not meet the criteria of a legal mortgage but are considered mortgages under equity. There are numerous situations that can lead to an equitable mortgage. As of 1961 the English court of law required the consent of the court before such mortgage could be put into effect.

• When the mortgagor deposits a title deed with the lender, it has historically created an equitable mortgage in England; however the creation of an equitable mortgage by such a course has been less definite in the United States.
• In an equitable mortgage the lender is secured by taking possession of the original title documents from the borrower. This is done by signing a memorandum of deposit of title deed or MODTD. This document is an undertaking by the mortgagor that he or she has deposited the deed with his or her own free will with the bank.
• An equitable mortgage can arise in two ways – either as a legal mortgage which was the result of never perfecting it by conveying the assets or as a specifically created mortgage as equitable mortgage. Under some jurisdictions the mere deposit of the title deed and relevant documents with the lender gave rise to an equitable mortgage; however this has been abolished in England. But the fact remains that in many jurisdictions company shares can be mortgages by deposit of share certificates.
• Basically an equitable mortgage can give the lender the right to foreclose in case of non payment or default on the part of the mortgagor. After foreclosure the mortgagee can either sell the property or appoint a receiver in case of non payment. Usually an equitable mortgage comes into picture when there is some legal technical error. In such cases the property is encumbered and as mentioned before, the lender has the right to foreclose.

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