Real estate projects are capital-intensive. For the provider to assist with financing, some form of collateral is required, the scope of which is laid down by a mortgage lien.
A mortgage lien determines whether a piece of real estate may be pledged as security and if so, up to what maximum amount.
Pledging is an extremely old concept: In return for a pledge, lenders lend higher amounts of money because they have the security of knowing that they can realize the pledge, should the borrower be unable to pay. However, pledged land cannot simply be handed over, which is why mortgage liens arose as a way of securing debts.
In a land register, lenders and borrowers record the maximum amount a piece of land can be used as a mortgage lien. When clients take out a mortgage to purchase, build or renovate a property, the credit institute receives a financial receivable and the mortgage lien to the plot of land.