Mortgages: Definition and Differences from a German Land Charge

How Does a Mortgage Work?

The mortgage secures exactly one particular claim – typically a real estate loan. Their amount automatically follows the status of this claim: With each repayment, the repaid part turns into a property debt, with full repayment, the mortgage extinguishes as a foreign right. They will be registered as such. Land charge – in section III of the land registerIn the event of recovery, the Order of priority.

Mortgage vs. land charge: the differences in practice

• Binding to the claim: The mortgage can never be higher than the secured residual debt; the land charge remains in full.
• Reusability: A land charge secures new loans without any problems after repayment; the mortgage would have to be ordered newly – with renewed costs.
• Dissemination: Today, German lenders secure almost exclusively via land charge; “mortgage” lives mainly colloquially – for example in the Mortgage rate or in the case of Pfandbrief banks (mortgage banks).

Where the term is still relevant today

Internationally, the “mortgage” remains the standard model, and the mortgage is also common in Austria and Switzerland – relevant for Germany, Austria and Switzerland-wide structures, as we have seen in the case of Financing in Austria and Switzerland accompanying. In Germany, the mortgage meets investors mainly in old stocks of the land register. For new financing – from Senior loans up to Property development finance – land charge is the means of choice.