What is a mortgage?

A mortgage is defined as a loan specifically for purchasing real estate, where the property being bought serves as collateral for the loan. This means that the lender has a legal claim to the property if the borrower fails to make the required payments on the loan. Mortgages are typically structured over long terms, often 15 to 30 years, and have specific repayment schedules that include both principal and interest components.

Understanding this definition is crucial because it establishes the legal and financial relationship between the buyer, the lender, and the property. Unlike grants or rental agreements, which involve different financial mechanisms and obligations, a mortgage directly links the loan amount to the value of the property, influencing how buyers approach purchasing real estate.