What is a mortgage?

A mortgage is a loan that is specifically secured by real property, meaning the loan is backed by the value of the property itself. When a borrower takes out a mortgage, they agree to repay the lender over a specified period, usually with interest. If the borrower defaults on the loan, the lender has the right to take possession of the property through foreclosure. This security makes mortgages a common financing option for purchasing homes and real estate, as it allows borrowers to leverage the property they are buying to secure the funds they need.

The other options do not accurately describe a mortgage. A legal document granting ownership of property refers to a deed, which transfers property ownership, not a loan. Insurance for home buyers relates to protecting against potential losses, not the loan itself. Appraising properties is a process used to determine property value and is unrelated to the concept of a mortgage. Understanding the definition and function of a mortgage is crucial for anyone involved in real estate transactions.