Hypothecation

Hypothecation - This sounds like a scary medical procedure, but it's actually the best part of buying a home. Hypothecation is when you borrow money and promise something valuable as security, but you still get to use it. Imagine you want to borrow money from a bank, and use your home as security. The bank says: You can live in your home, but if you don’t pay back the loan, we can take the house and sell it.” In simple terms: You own the home, you live in it every day. The home is the promise that you’ll repay the loan. If the loan is paid on time, nothing changes. If the loan is not paid, the bank can take the home. Easy way to remember, you keep using your home, but the bank has a backup plan. That backup plan is called Hypothecation. Hypothecation means borrowing money and pledging your home as security, while still living in it.