Definition of Mortgage A mortgage is an agreement to give up an interest in something if you fail to perform some duty.

In many cases, it means that you'll give up your home if you fail to repay your home loan as agreed. You can use mortgage as a verb, meaning "to pledge". Mortgage and "home loan" are often used interchangeably. However, the mortgage is really the agreement that makes your home loan work -- the bank wouldn't lend you hundreds of thousands of dollars unless they knew they could claim your home in the event of your default. Examples: I had to mortgage my home to pay for my child's education. Significance Mortgage signatures must be notarized in order to ensure that the proper people are signing the loan documents. The deed, also known as a mortgage, must be initialed on each page to show that the buyer has reviewed the entire document. This is a form of deterrence to prevent people from trying to claim that they were not involved in the sale. It protects the buyer and seller from fraud. Benefits
The mortgage is a debt, but it provides a sense of ownership to the buyer. Technically, the buyer does not own the home until the note is paid off. If payments are missed, the bank that holds the loan may foreclose on the home. The mortgage provides tax incentives to the borrowers, who can typically deduct the amount they pay in mortgage interest from their taxable incomes.

PLEDGE:
The transfer of possession of personal property from a debtor to a creditor as security for a debt or engagement; also, the contract created between the debtor and creditor by a thing being so delivered or deposited, forming a species of bailment; also, that which is so delivered or deposited; something put in pawn.

Examples of PLEDGE
1. He has promised to fulfill a campaign pledge to cut taxes. 2. To make a pledge or donation, please call the charity's office. 3. The company has made a pledge of over $3,000. 4. He left his car as a pledge that he would return with the money.

HYPOTHECATION: Hypothecation is a charge against property for an amount of debt where neither ownership nor possession is passed to the creditor. Hypothecation is a charge against movable property. The goods will, unlike a pledge, be retained by the borrower and be in the borrowers possession. The borrower gives only a letter stating that the goods are hypothecated to the banker as security for the loan granted. There will be no transfer of the property to the borrower. Features: It is an equitable charge created against immovable property. Neither the possession nor the ownership of the property is transferred to the banker. The contents of the letter of hypothecation determine the rights of the banker. The banker has the right to take possession of the property (if there is default) and sell the hypothecated goods to realize his dues. If selling rights are not incorporated in the letter, the banker has to approach a court of law to recover the dues against the hypothecated property. Hypothecated goods can be sold any time to the genuine purchaser for value without the knowledge of the banker or the hypothecated property can be pledged to another person provided the pledgee has no knowledge of the previous hypothecation.

ASSINGMENT NO: 7
BANKING & FINACE

TOPIC: MORTAGAE, HYPOTHECATION, PLEDGE PREPARED BY: USAMA ZAFAR REG NO: 2176 SUBMITTED TO: SIR TARIQ