What is a mortgage?

A mortgage is fundamentally defined as a loan secured by real property. In this context, the borrower (the mortgagor) receives funds from a lender (the mortgagee) to purchase real estate, and the property itself serves as collateral for the loan. This means that if the borrower fails to repay the loan, the lender has the right to foreclose on the property, allowing them to recover the amount loaned. This relationship is crucial, as it establishes both the financial framework for property acquisition and the legal rights concerning the property in the event of default.

The other options misrepresent the nature of a mortgage. For instance, a mortgage does not involve a transfer of ownership from one individual to another; that definition aligns more closely with a deed. Additionally, it is not a document outlining rental terms, which would pertain to lease agreements, nor does it serve as an appraisal of property value, which is a separate process conducted to determine a property's market worth. Understanding the specific role of a mortgage is essential for navigating real property transactions.