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In Real Estate terms, to hypothecate is to use real property as security for a debt. The main difference from the Webster 1913 definition is that it is not a pledge, which, in real estate terms, is the act of using personal property (which is anything except real property, i.e. cars, guitars, computers) as security for a debt.

When you trade in your stratocaster at the pawn shop you are pledging that personal property. The main difference between a pledge an a hypothecation is that when you pledge something the lender keeps the thing you pledge and when you hypothecate something you keep it, such as in a mortgage when you keep full title to your property and full use of it, but it is hypothecated by a security instrument (often a mortgage or a deed of trust) to whomever lent you the money.

Hypothecate is not to be confused with hypothesize. The two sound identical but mean two totally different things.

Hy*poth"e*cate (?), v. t. [imp. & p. p. Hypothecated (?); p. pr. & vb. n. Hypothecating (?).] [LL. hypothecatus, p.p. of hypothecare to pledge, fr. L. hypotheca pledge, security. See Hypotheca.] Law

To subject, as property, to liability for a debt or engagement without delivery of possession or transfer of title; to pledge without delivery of possession; to mortgage, as ships, or other personal property; to make a contract by bottomry. See Hypothecation, Bottomry.

He had found the treasury empty and the pay of the navy in arrear. He had no power to hypothecate any part of the public revenue. Those who lent him money lent it on no security but his bare word. Macaulay.


© Webster 1913.

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