Hypothecation in real estate is the use of someone else's property as collateral for a loan. In other words, it allows you to use your property to get a larger loan than you could without the property being pledged as collateral. Hypothecation can be an effective way to get approved for a large loan or to enhance financing terms. For example, if you're trying to get a loan for a property that you're buying, the lender may be more willing to give you a better interest rate if you put up your current property as collateral. Hypothecation can also be used to get equity out of your property without selling it.