Land charge / mortgage - What financing risk exists?

Grundschuld:
- is not tied to a specific claim
- remains in place even if no claim exists
- there is a real liability (i.e. only the property is liable, not the borrower)
- the property can serve as collateral for any claims.

Hypothek:
- applies only to a specific claim
- exists only as long as the claim is not fully repaid
- there is a personal liability (i.e. the borrower is liable with their entire personal assets)
- the property serves as collateral only for this specific claim

You will have a hard time finding a bank that still grants [Hypotheken]. As a rule, for purely practical reasons for both parties, only [Grundschulden] are agreed upon.

there is personal liability

This is usually agreed separately in addition to the land charge, right? We are not in America, where you can just leave the house behind and then be debt-free (AFAIK).

The question was, however, what the difference between a mortgage and a [Grundschuld] is.

What you describe for DE is correct in the long run, but it is not based on the security, rather on the obligation under the loan agreement. At least in the case of the [Grundschuld], these things are to be considered completely autonomous and independent of each other.

Hello!

As my bank colleagues have already explained before, you will (probably) not find a bank that offers a mortgage, and if they do, the conditions will certainly be uninteresting. The banks with a "credit factory" all offer loans secured by a land charge.

I consider your concerns that the evil bank always wants to get rid of a customer when an interest rate is running against them unfounded. The big banks (should)/do conduct reasonable asset/liability business. Interest rate risks are also hedged. Many banks also securitize loans and refinance themselves (MBS / Pfandbriefe).

If a bank were to become illiquid, it is not entitled to collect the claims directly. Rather, they will sell assets (i.e., your loan) with all the loan conditions.

As long as you meet your obligations under the loan, no one will come after your money.

Hello everyone,

thank you very much for all the helpful answers!

That no bank offers a mortgage loan on "normal" terms really seems to be the case, but I still can't get it out of my head.

[*]If there should be an interest surcharge on the mortgage (see post by ), what is the reason for it? According to the argumentation, the land charge cannot be "arbitrarily" withdrawn either and provides exactly the same collateral for the bank? Or is the land charge the safer deal for the bank because of "various options in case of emergency" (see the first post)?

[*]The supposed advantage of continuing to use the land charge for follow-up financing (that's what you meant, , right?) is no longer really present with such a long-term contract.

I only see advantages in the mortgage as a consumer. Why has the land charge become so widespread? Is this perhaps the exercised power of the banks?

: This is not about respect, the banker’s professional image, or anything like that. It is only about the risks of the land charge. Maybe you can also contribute something to the factual topic and not get hung up on the subordinate clause?

There is no question about the conditions under which a mortgage loan is offered. That hasn’t existed for decades. The land charge simply offers too many advantages over the mortgage.

What advantage do you see in the mortgage?

Can you secure another loan with the mortgage? (e.g., a new loan for the new heating system, security for a consumer loan to improve conditions)
Can the mortgage on the parents’ house be used for your own financing?
Can the mortgage be used in a debt restructuring?
Can the mortgage be upvalued?
And so on.
All these points are easily possible with the land charge; with the mortgage, there are real problems.
From a realization perspective (and really only there), both security instruments along with ancillary agreements are ultimately equivalent.

But as I said, it is pointless to think about it. Since my training in the early 90s, I have not seen a mortgage in new business.