What is the difference between lien and loan

A mortgage is also an assurance to the lender which promises that the lender can recover the loan amount even if the borrower defaults. The possession of the property remains with the borrowers as they will usually reside in their home. The mortgage will come to an end once in either two circumstances; if the loan obligations are met, or if the property is seized. Mortgages have become the widely used method for purchasing real estate assets without having to pay the total amount at once.

Liens are mortgages are quite similar in that they are both security interest options that are used for the same purpose; that is to ensure that loans are repaid and obligations are met. Active 4 years, 9 months ago. Viewed 74k times. Improve this question.

Everlight Everlight 1 1 gold badge 2 2 silver badges 6 6 bronze badges. Is is true than when a mortgage loan is securitized and traded on stock exchange is losing its loan qualities and becomes a commodity, a stock with different attributes; also a loan cannot be a loan and a stock at the same time as it cannot revert back to its loan status?

Add a comment. Active Oldest Votes. Improve this answer. In many jurisdictions, there are also mechanic's liens that have different rules than the liens created by mortgages, construction loans and the like.

The holder of a mechanic's lien can sue to have the lien enforced and a court can order the property sold even if though there is another lien e. What this means is, if you default on payments, the lender can get its money back by liquidating selling your home. Now legally, the lender does not own your home — you do.

The lender only has a mortgage interest in your property. So how can the lender sell something it doesn't own? That's where the lien comes in. A lien is a legal claim on an asset. In the case of a mortgage, it gives the lender the legal right to claim your home as their own and sell it to ensure they recover the amount of money owed them. It's actually quite tough to distinguish between a lien and a mortgage because, to home buyers, they are essentially the same thing.

Here's the breakdown:. The final point is important. Example of hypothecation is vehicle financing where the lender has the asset that has been hypothecated against the loan with a bank. If the borrower defaults, the bank then takes the possession of the vehicle, after sufficient notice, in order to recover the money. Under a lien, the lender gets the right to hold up a property or machinery used as collateral against funds borrowed.

Examples of lien include rent receivable, unpaid fees etc. Since possession is with the creditor, it is the strongest form of security. Lien can be on both movable and immovable property. But generally, lending companies choose to have mortgage on immovable property and lien on movable security like shares, gold, deposits etc.

Under a mortgage, the legal ownership of the asset can be transferred to the lender if the borrower defaults on the loan amount. However, the borrower continues to remain in the possession of the property. Mortgage is usually used for immovable assets example: house, land, building or any property which is permanently fixed to the earth or attached to the land.