Mortgage (Hipoteca)

A mortgage (hipoteca) is a real right of guarantee through which a debtor offers a property as security to a creditor, without having to hand over possession of the property. The owner keeps living in or using the property; the creditor only has the right to foreclose on it through the courts if the debt goes unpaid.

• Creation: a mortgage must be executed by public deed and registered with the Real Estate Registry Office (CRI). Without registration, it has no effect against third parties.
• Mortgage ranking: it is possible to create second- and third-rank mortgages on the same property, as long as the property’s value supports multiple guarantees. The first-rank creditor has priority in foreclosure.
• Legal mortgage: in certain cases set out by law, a mortgage arises automatically, without a contract, such as legal mortgages in favor of the government treasury.
• Difference from fiduciary lien (alienação fiduciária): under a mortgage, the property stays in the debtor’s estate and foreclosure goes through the courts (slower); under a fiduciary lien, the property sits under the creditor’s resolvable ownership and repossession is out-of-court (faster). Because of this, the real estate market and banks have shifted almost entirely to the fiduciary lien structure since Law 9,514/1997.
• Termination: a mortgage ends when the debt is paid, with the release recorded on the title record (matrícula), or by court order.

In Florianópolis, mortgages still show up in rural financing, older development contracts, and corporate transactions using real estate as collateral, but they are uncommon in new home loans, which almost exclusively use the fiduciary lien structure.