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

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.

 

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