Mortgage or land charge: This is how you use your property as security for building financing

Mortgage or land charge: This is how you use your property as security for building financing

According to a report by www.t-online.de, when buying a property there are various options for financing it and providing it as security. Mortgages and land charges play an important role.

When buying real estate in Germany, all properties are recorded in the land registry office, and the transfer of ownership is recorded in the property's land register. In addition to special rights, securities such as mortgages and land charges are also entered in the land register to secure financing.

The land charge and the mortgage are the two most common forms of real estate liens. The land charge is entered in the land register through a land charge order, either as a registered land charge or a letter land charge. It can be registered independently of a specific obligation and used as security for further possible financing. In contrast, the mortgage is 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.

Registered land charges predominate in Germany today as they have proven to be a more flexible form of security. While a mortgage is automatically deleted after the loan has been repaid, the land charge can remain recorded in the land register and can be flexibly reused for future loans.

These differences also have an impact on the real estate market. The flexibility that the mortgage offers can make it preferred by property owners. In addition, potential lenders may prefer the registered mortgage as a safer form of financing, which could increase the demand for financing options with mortgages.

Overall, it shows that the choice between a mortgage and a land charge not only affects individual financial aspects, but can also have an impact on the entire real estate market.