Legal Tip 118: Loans and Mortgages are not the same thing!

Discussion in 'Legal Issues' started by Terry_w, 21st Mar, 2016.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Loans and Mortgages are not the same thing!


    A loan occurs when someone lends money to someone else. It is a debt.

    A mortgage is a form of security which is usually taken over real property to secure a loan.

    You can have a loan without a mortgage and have a mortgage without a loan.

    However in general use people often confuse the two terms.

    Example
    “I just took out a mortgage with ANZ Bank”
    No you didn’t! You probably borrowed or took a loan from ANZ Bank and gave them a mortgage over property you own.
     
    Michael Mitchell and lixas4 like this.
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
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    Here is a further example of how they are different.

    1
    Husband and wife borrow to buy a property owned by both of them
    They are both the borrowers and mortgagors.

    2
    Husband and Wife borrow money secured against the wife's property.
    The wife gives a mortgage. She is the mortgagor.
    The husband and wife are the borrowers. They are the borrowers.

    3
    Company owns land as trustee of a fixed unit trust
    Homer borrows against the property using the trust property as security
    Here Homer is the borrower
    The company is the mortgagor
     
    Michael Mitchell likes this.