What is a mortgage?

A mortgage is specifically defined as a loan that is used to purchase real estate. This type of loan is secured by the property being purchased, meaning that the lender can take possession of the property if the borrower fails to repay the loan. Mortgages are typically used to finance the purchase of residential homes, commercial properties, or land.

The process involves the borrower taking out a loan to cover the cost of the property, with agreements made regarding the repayment terms, interest rates, and the duration of the loan, which is often 15 to 30 years. The security aspect of a mortgage sets it apart from other types of loans, as it is directly tied to the value and ownership of the real estate in question.

Understanding this definition is crucial for navigating the complexities of real estate transactions and financing options, as mortgages are fundamental to home buying and investing in property.