Sample Hypothecation Agreement Form
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How to fill out Sample Hypothecation Agreement Form?
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FAQ
The most common example of hypothecation is mortgage lending. Under the terms of a mortgage, the borrower technically owns the house, but since the house is pledged as collateral, the lender has the right to seize the house if the borrower cannot meet his end of the loan agreement -- also known as foreclosure.
Hypothecation is when you agree to give a certain asset in exchange for a loan. Secured loans, including auto loans and mortgages, require collateral. If you default on your loan, a lender can use that collateral to pay for the outstanding balance. When that happens, the asset is hypothecated.
An example of hypothecation would be an investor who takes out a mortgage loan to purchase an investment property. The property serves as collateral for the loan. Meanwhile, the investor collects the rental income derived from it.
The hypothecation agreement involves the customer pledging securities as collateral for their margin loans. Just like a home is collateral for a mortgage, securities held in a brokerage account serve as collateral for margin loans.