Mortgage

Definition

A lien against real estate that secures payment of a debt.

Purpose

Mortgages provide a way for individuals and businesses to borrow money to purchase real estate, using the property as collateral. The lender holds a lien on the property until the debt is repaid, ensuring they have a claim to the property if the borrower defaults on the loan.

Examples of Use

• Home purchase: Obtaining a mortgage to finance the purchase of a residential property.
• Commercial real estate: Using a mortgage to acquire or refinance commercial properties such as office buildings, retail spaces, or industrial facilities.
• Property development: Financing the construction of new real estate projects through a mortgage.

Related Terms

• Lien: A legal right or interest that a creditor has in the debtor's property.
• Foreclosure: The process by which a lender takes possession of a property due to the borrower's failure to make mortgage payments.
• Refinancing: The process of replacing an existing mortgage with a new one, typically to obtain better terms or lower interest rates.

Notes

• Mortgages typically involve a down payment, monthly payments of principal and interest, and various fees and closing costs.
• Interest rates on mortgages can be fixed or variable, affecting the overall cost of the loan.
• It is important for borrowers to understand the terms of their mortgage and ensure they can meet their payment obligations to avoid foreclosure.