finance
hypothecation
Pledging property as security for a loan without giving up possession of it. In a typical mortgage, the borrower hypothecates the home to the lender but continues to live in it. If the borrower defaults, the lender can enforce its security interest through foreclosure.
- Exam tip
- Hypothecation means you keep possession while pledging the property. It is the basis of how mortgages work.
- Example
- A homeowner hypothecates her house to secure a $250,000 loan and continues to live there while making payments.
Related terms & state variants
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Last verified: 2026-10-23