What is the difference between a regular mortage and amortage bond? - ProProfs Discuss
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What is the difference between a regular mortage and amortage bond?

Asked by Drue, Last updated: Oct 22, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

A mortgage is usually a loan offered by one institution to a borrower in exchange for a claim on assets if default occurs. As the text stated, the mortgage bond was created when the capital requirements of corporations became too large to be financed by the resources of any one individual lender. So there is no fundamental difference between the two except for the reasons why they might be offered. You should also keep in mind that only portions of a pledged asset might be covered by a bond issue, allowing more than one type of issue to be secured by a similar asset. And if two issues are secured by the identical asset for equal value, the lenders are taking the risk that they won't be able to recover the full amount of the loan that was offered - something that the lender would have to think long and hard about before offering funds to the borrower.

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