The nature and value of the assets mortgaged for a loan are usually negotiated between the lender and the borrower. Raymond James Bank offers a pledging mortgage in which the mortgaged assets are held in an investment account with Raymond James. Among the features and provisions are: the asset is only a guarantee for the lender in case of default of the borrower. However, for the borrower, the mortgaged assets could contribute significantly to the granting of the loan. Using the asset to secure the bond may allow the borrower to charge a lower interest rate on the bond than he would have made on an uninsured loan. Generally, asset-based mortgages offer borrowers better interest rates than unsecured loans. Using mortgaged assets to secure a bond has several benefits for the borrower. However, the lender will require a certain type and quality of investment before considering taking out the loan. In addition, the borrower is limited to the measures he can take with the mortgaged securities. In bad situations, the borrower, if he has fallen behind, loses the mortgaged securities as well as the house they buy.

Mortgaged assets can be used to eliminate the down payment, avoid PMI payments, and guarantee a lower interest rate. Suppose, for example, that a borrower wants to buy a home worth $200,000, which requires a $20,000 $US. If the borrower has $20,000 in shares or investments, they can be mortgaged against the down payment to the bank. A deposit contract defines what is due, what goods are to be used as collateral and what conditions apply to the satisfaction of the debt or obligation. In a simple example, John asks to lend Mary $500. Mary first decides that John must promise his stereo as a guarantee that he will repay the debt at some point. The law calls John the Pledgor and Mary the believer in pledges. The stereo is called pledge property. As with any common deposit contract, possession of the property is transferred to the pledge creditor. At the same time, however, ownership (or ownership) of the mortgaged property remains the responsibility of the pledge creditor. John gives Mary the stereo, but he still owns it legally.

If John repays the debt in accordance with the contractual agreement, Mary must return the stereo….