A mortgage is a legal process where the title of real estate property, like land or buildings, is transferred from the owner to the lender as collateral for a loan. This involves a mortgage deed, typically for a larger loan amount and longer tenure. If the borrower can't repay the loan, the lender can acquire and sell the property. Meanwhile, hypothecation is when a person borrows money by using an asset as collateral without transferring its title or possession. This applies to movable assets like vehicles or machinery. The ownership remains with the borrower, and the process is documented through a hypothecation agreement. These loans are usually smaller and for a shorter period. The lender has a security interest in the asset but does not hold its title. In a nutshell, while a mortgage involves transferring the property title to the lender, hypothecation allows borrowers to keep ownership and control of their assets while using them as collateral.
