Everything you need to know about mortgages: Differences between mortgages and land charges explained

Everything you need to know about mortgages: Differences between mortgages and land charges explained

According to a report by www.t-online.de, in Germany mortgages or land charges are often used as security for the property when financing construction. But what is the exact difference between the two?

The mortgage is a security instrument that is registered in the land register of a property to secure financing. There are three forms: land charge, mortgage and pension debt. The mortgage is usually used as the preferred form of mortgage. It can be registered independently of a specific obligation and can therefore be used as security for further possible financing. The legal framework for land charges can be found in the Civil Code (BGB).

In contrast, the mortgage is fundamentally based on a concrete obligation, namely tied to a specific loan and its terms and conditions. Once the loan debt has been paid off, the basis of the mortgage no longer applies and it cannot be used for further financing.

The pension debt, another form of mortgage, is of little importance today. In Germany today, registered land charges predominate and have become established as flexible collateral for future loans.

As a real estate market expert, it is important to understand how these securities work as they have a direct impact on real estate lending and financing options. The ability to flexibly reuse land charges can increase the attractiveness of real estate as collateral and thus have a positive impact on the real estate market.