Mortgage
Table of contents
What are the special types of mortgage?
a) Mortgage as bridge financing or bridge loan
b) Mortgage as a source of liquidity or as a retirement mortgage
c) Mortgage as a forward loan
1. What is a mortgage?
A mortgage is a type of loan where a property (e.g. a house or flat) or even a plot of land is usually pledged as security for the loan. This so-called “land charge” serves as security for the lenders if the loan amount plus accrued interest cannot be repaid. In this case, the property can be for example auctioned off to cover the debt. Once the mortgage has been settled, the land charge can be cleared.
2. What is a second mortgage?
A second mortgage, also known as a junior mortgage, is an additional loan secured by the same property or collateral. Unlike the first mortgage, this security is registered “in the second rank” and thus has a lower priority in the event of foreclosure. The creditors or lenders of the property's first mortgage would therefore be given preferential treatment.
3. What are the alternative names for “mortgage”?
Besides the term “mortgage”, this type of loan is often also referred to as a “real estate loan” or “home loan”. Banks sometimes also speak of “home financing” or “construction financing”. However, all these terms usually mean the same thing: a loan secured by real estate.
4. What are the special types of mortgage?
In addition to the classic mortgage explained above, there are more specific forms of mortgage loans, which are explained here:
a) Mortgage as bridge financing or bridge loan
b) Mortgage as a source of liquidity or as a retirement mortgage
d) Mortgage as a forward loan
a) Mortgage as bridge financing or bridge loan
A mortgage as bridge financing (also called bridge loan) is a loan that is used to cover a temporary gap in financing. This occurs, for example, when property owners intend to buy a new property before they have sold their old one. In such cases, a mortgage as bridge financing can be a useful solution, as the required funds are made available without borrowers being forced to sell their existing properties.
b) Mortgage as a source of liquidity or as a retirement mortgage
A mortgage as a source of liquidity is a way to obtain funds from a property without actually having to sell the house or flat. In such cases, the property is mortgaged or an existing mortgage is increased, and the loan can be used by the borrower for any purpose.
This option also exists as a so-called “retirement mortgage” (or reverse mortgage). This type of loan is only given to elderly people who own a property. It is often used when there is a considerable amount of equity in the property, but currently a lack of liquid assets.
c) Mortgage as a forward loan
The term forward loan is used when the loan, in this case the mortgage, is taken out in advance to be used at a later date. This can be the case if, for instance, the borrower already owns a property and intends to secure the current interest rate in advance for subsequent house construction.
5. Financing possibilities using mortgages by LEND
LEND is specialized in tailor-made mortgage solutions. With LEND, Borrowers – whether private individuals or companies – can both finance real estate and increase their liquid assets by using existing property. For more information on this, as well as to calculate the financing potential, please see “Mortgage”.
When renovating existing real estate, a home furnishing loan (for private borrowers) or a business loan (for companies) may also be a suitable solution.