Q&As

What is the difference between a mortgage and a charge?

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Published on LexisPSL on 27/11/2013

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • What is the difference between a mortgage and a charge?
  • What is a mortgage?
  • What is a charge?
  • Fixed charges
  • Floating charges
  • What is the difference?

What is the difference between a mortgage and a charge?

The terms 'mortgage' and 'charge' are often used interchangeably although they are not the same in a legal sense.

What is a mortgage?

A mortgage is the transfer of title to an asset by way of security for a debt or the discharge of certain obligations, on the express or implied condition that the asset will be transferred back to the security provider (the 'mortgagor') on the discharge of such debt or obligations (this implied condition is known as the mortgagor's 'equity of redemption'). If legal title is transferred then this will be a legal mortgage, whereas if beneficial title is transferred, it is an equitable mortgage (see Mortgages—Mortgages can be legal or equitable. The secured party (the 'mortgagee') does not have to actually be in possession of the mortgaged property for a mortgage to exist.

Legal mortgages can be taken over both tangible assets (eg land, ships and aircraft) and intangible assets (such as intellectual property rights). It is possible to create an equitable mortgage over any asset which can be the subject of a legal mortgage. See Practice Note: How is a mortgage created?.

What is a charge?

A charge has the following traits:

  1. the secured party (the 'chargee') has an equitable proprietary interest in the charged asset (for more information on the meaning of 'equitable', see Legal

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