hypothecate = take loan out against

Question

Hi,I've been trying to write this in a natural manner. I don't know how a teacher will write this.Can you write it a nice way? If your parents have a house, you can take out a loan for your house against theirs. If you don't pay your mortgage, the bank will keep your parent's property. Your parents can either do that or stand guarantor for you in case you miss a mortgage payment.I think you can you say hypothecate. I've never heard it in a sentence.Is hypothecate mean take a loan out against property. Is it common to say "take out a loan against'? What does it mean?Thank you!!!

Arclyte · Accepted Answer

To "take out a loan against" means you have borrowed money using the referred object (a house, car, etc) as collateral for the loan.

While technically correct, you won't find many people using 'hypothecate' in a sentence. If it is someone else taking responsibility for your payments I think most would use the turn 'co-sign', as in: 'My parents co-signed my car/home loan for me.' A 'co-signer' is a second guarantor on a loan - your parents would become responsible for paying your loan/mortgage if you failed to pay it.

To put up your house as collateral against another loan or mortgage while it still has a mortgage against it (ie, a home equity loan) would normally be referred to as a 'second mortgage' - a mortgage taken out before the first is paid off. I don't know if there is a straightforward way to convey that your parents have co-signed your mortgage with their property as collateral... besides saying that I guess!

BarbaraPA · Answer

I've never seen this word before.

Why wouldn't your own house stand as collateral against your own home loan? If I don't make my payments, the bank takes my house, and I don't own it any longer. Why would other collateral be needed? I understand pledging your home against a loan that has no real asset associated with it, like a loan for a start-up business or even an education, but why pledge two homes for the loan against only one?

Arclyte · Answer

I don't think most banks would allow you to directly use one home as collateral for another, but you could take an equity loan against the first house (giving you cash in hand) to use as a down-payment on the second home.  That's why I mention 'co-signing' - the bank will take the assets of the co-signer (including their home equity) into account when judging whether to give you a mortgage.  Hypothecation actually takes place in any normal mortgage setup - you put up the house as collateral to the bank making the loan, we just don't really refer to it that way because it's more of a technical term for the type of agreement.  Most would just say "mortgage" and understand that it means the house acts as collateral.

Anonymous · Answer

In Europe, Someone such as a parent can hypothecate their house in case their son defaults on a payment because you can't get your house repossessed. The bank needs to know that if you ever defaulted that someone way pay for you. That is why I used hypothecate.

Would you say My parents hypothecated their house against my mortgage payment.
My parents hypothecated their house against my house.

How would you say these sentence above?

hypothecate = take loan out against

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