California Real Estate Practice Exam

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The offer of pledging real property to secure a loan is known as what?

Mortgaging
Lien
Hypothecation
Collateralization

The correct answer is: Hypothecation

Mortgaging refers specifically to obtaining a loan for the purpose of purchasing real property, whereas hypothecation applies to using real property as collateral for any type of loan or debt. Lien refers to a legal claim on a property used to secure payment of a debt or obligation, but does not necessarily involve a loan. Collateralization can refer to using any type of asset, not just real property, as security for a loan. Therefore, the offer of pledging real property to secure a loan is best known as hypothecation.