Mortgage credit: what is it, what types are there

Mortgage credit is a type of lending method in which the client, when borrowing money from the bank, offers a valuable asset to be pledged in case of default. For example, you have applied for a mortgage loan and wanted to offer your house as collateral. According to the contract, the bank has the right to keep that house if you fail to pay the debt. Mortgage lending can be an easy route to cheaper loans, but there are risks to consider. Competitive mortgage rates are widely used because it helps to reduce the risk taken by banks and improves loan conditions.

Home loan

Mortgage credit is the most used modality in home loan. In this model, the customer asks the bank for a loan to buy a house and offers the house he is buying as collateral. Other variants of the same mortgage credit model occur when you ask the bank for money to buy land and build a house or even to carry out works on a property that already exists.

Consolidated credit

Consolidated credit does not have to be a mortgage loan, but it can be. When it happens, the consolidation of credits (the merging of all loans into one, with a single monthly payment) presupposes the mortgage of a valuable asset to help the applicant negotiate more advantageous terms. This additional loan will have different conditions than the mortgage loan, but it will be based on the same mortgage.

What goods can be pledged as collateral?

It is not mandatory that you offer your house for the mortgage when you make a loan. The mortgaged property can be an empty land, a luxury car, a yacht or any other property. You can even mortgage someone else’s property, but you will need that person to authorize you by writing. The only rule in this case is that the value of the mortgaged property must be greater than the value of the loan. For example, if you have a boat worth 70,000 dollars, you can offer it as collateral for a 50,000-mortgage loan. However, please note that the property offered for mortgage cannot be compromised by other charges or mortgages.


It is therefore important to know mortgage credit well and to know how it works. More than that, it’s worth knowing how to assess your situation and see if it makes sense to put at risk an asset you already have in order to borrow more money from the bank.