Leasehold Mortgage Law and Legal Definition

Leasehold Mortgage is a mortgage secured by a lessee's leasehold interest. Often, this type of mortgage is helpful in providing the resources needed to erect a building or series of buildings on the leased land. For the most part, the lease on the land must be for a number of years before a lender will seriously consider approving the mortgage application.

Leasehold mortgage is common with the development of real estate for commercial purposes. For example, a developer may obtain a fifty-year lease on acreage that is already or shortly will be zoned for business use. Once the lease is in place, the developer can secure a leasehold mortgage as a means of obtaining funds to construct a shopping mall on the acreage. Assuming the investment is successful, the mall generates enough revenue to cover both the land lease and repay the leasehold mortgage according to the terms and conditions outlined in the loan contract.