What is a mortgage?

A mortgage is defined as a loan specifically for purchasing real estate that is secured by the property itself. This means that when a borrower takes out a mortgage to buy a home, the property serves as collateral for the loan. If the borrower fails to repay the loan, the lender has the right to foreclose on the property, meaning they can take possession of it to recover their money.

The significance of the mortgage structure is that it allows individuals to purchase homes without needing the full amount of money upfront. Instead, borrowers can pay a portion of the home's price as a down payment and finance the rest through the mortgage. This system makes homeownership more accessible to many people.

In contrast, the other choices outline concepts that do not accurately describe what a mortgage is. Grants and financial gifts are forms of assistance, but they do not involve borrowing against property. A rental agreement is an entirely different arrangement where one party pays to occupy a property owned by another party without taking ownership. Understanding these distinctions helps clarify why a mortgage is uniquely defined as a secured loan for real estate.