Mortgage and Lien Right Credit and Collateral Processes
The concepts of “mortgage” and “lien” that we encounter in transactions such as purchasing real estate or using credit can be confusing for many people. In this article, we will examine in detail what mortgage and lien rights are, how they differ from each other, and what role they play in credit and collateral processes.
What is a Mortgage?
A mortgage is a real right established on an immovable property in order to secure a specific receivable. This right gives the creditor the authority to collect the receivable by selling the mortgaged real estate in case the debt is not paid. A mortgage is established with an official deed and is registered with the land registry.
What is a Lien Right?
A lien is a real right established on movable or immovable properties in order to secure a specific receivable. It gives the creditor the authority to collect the receivable by selling the mortgaged property in case the debt is not paid. A lien right can be established with an official deed or contract.
Differences Between Mortgage and Lien
Feature Mortgage Lien
Subject Immovable properties Movable and immovable properties
Establishment Form By official deed and registration to the land registry By official deed or contract
Securing the Receivable For a specific receivable For a specific receivable
Creditor’s Authority To collect the receivable by selling the mortgaged property To collect the receivable by selling the mortgaged property
Transferability Transferable Transferable
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Mortgage and Lien in Credit and Collateral Processes
Mortgage and lien rights play an important role in credit and collateral processes. Banks usually request a collateral when granting a loan. This collateral can be in the form of a mortgage or lien.
Mortgage Loan
Mortgage loan is a loan given in return for the mortgage of an immovable property. This type of loan is usually used for long-term loans such as housing loans, vehicle loans or commercial real estate loans.
Pledged Loan
A pledged loan is a loan given against the collateral of a movable or immovable property. This type of loan is usually used for short-term loans.
