What is a "mortgage"?

A mortgage is best defined as a loan specifically used to purchase real estate, secured by the property itself. This means that when a borrower takes out a mortgage, they are borrowing money from a lender to buy a piece of real estate, such as a home or investment property. The property acts as collateral for the loan, which provides security to the lender; if the borrower fails to repay the loan, the lender has the legal right to take possession of the property through foreclosure.

Understanding this definition is crucial because it highlights the functional role of a mortgage in real estate transactions. Mortgages are fundamental to the process of buying homes, as they allow buyers to spread the cost of a property over many years instead of needing the full amount upfront. This mechanism is a significant driver of the residential real estate market and is a vital aspect of real estate finance.

The other choices do not accurately capture the nature of a mortgage, as they pertain to different concepts within real estate. For example, a real estate investment strategy may include various ways to invest in property, but it does not define what a mortgage is. Similarly, a contract for leasing a property would relate to rental agreements rather than financing purchases, and an agreement to sell real estate pertains to the transfer of