Mortgage vs Charge – Difference and Comparison

What is a Mortgage?

A mortgage, also known as a mortgage loan or hypothec loan, is a type of loan that real estate purchasers use to raise funds to purchase real estate or used by the property owners to get a loan and raise funds for some purpose by putting a type of security on the property which is being mortgaged. The word is derived from the French term, which means death pledged.

In simple words, we can say that a mortgage is a type of collateral security given by the borrower as a consideration for the loan. The mortgage borrowers can be the person who mortgages their home as collateral security or the business who mortgages their commercial property as collateral. Commercial property includes investment portfolios, business premises, or residential property.

The arrangements of the loan are either made directly or are made indirectly with the help of intermediaries. Depending on the country, the lenders can be financial institutions like banks, building societies, or credit unions. In case the borrower fails to repay the loan amount or becomes insolvent or bankrupt, the lender has the right to take over the borrower’s property or the collateral security given by the borrower at the time of the loan to fulfill his debts.

What is Charge?

Charge refers to the interest of the security loans on the company assets through a mortgage. It is created for a security purpose to repay the loan by the concerned parties. The Charge is charged on movable property. If the Charge is on a movable property, it becomes Hypothecation or Pledge, and if it is on an immovable property, it becomes a mortgage.

A charge can be of 2 types: Fixed Charge and Floating Charge. Fixed Charge refers to the Charge incurred on fixed assets, including Plant and Machinery, Buildings, Land, etc., whereas Floating Charge refers to the Charge incurred on uncertain assets like stocks.

Difference Between Mortgage and Charge

  1. Charge refers to the creation of assets for security to repay a loan, whereas mortgage refers to the transfer of interest from one party to another.
  2. There is no requirement to register a Charge under any law, but the mortgage should be registered under the 1882 property transfer act.
  3. A charge can be paid at any time based on the agreement between the two parties, whereas a mortgage is paid within a specific time.
  4. A charge is on Movable property, but the mortgage is on immovable property.
  5. In Charge, the lender doesn’t have the right to sell the property, but in a mortgage, the lender has the right to resell the property.

Comparison Table Between Mortgage and Charge

Parameter of ComparisonMortgage  Charge
CreationIt is created by the lenders as well as by the borrowers.The concerned parties create it.  
Type Of property on which chargedCharged on Immovable Property.Charged on Movable Property.
InterestInterest payments are required.Interest payments may or may not be required.
TermLoans must be repaid within a specific timeline.Loan terms can vary depending on the agreement between parties.
RegistrationIt must have been registered under the Transfer of Property Act of 1882.Its registration is optional. When it is the result of an act of parties, then only its registration is compulsory else; there is no need.