How is a mortgage defined in real estate?

In real estate, a mortgage is specifically defined as a loan in which real estate serves as collateral for the loan. This means that the borrower pledges their property to the lender as security for the repayment of the loan. If the borrower fails to meet their loan obligations, the lender has the legal right to foreclose on the property, meaning they can sell it to recover the outstanding debt.

The concept of using real estate as collateral is fundamental to mortgages, as it provides the lender with a degree of security, knowing that they can recoup their losses by reclaiming the property in the case of default. This arrangement facilitates home buying for many individuals, allowing them to leverage the equity in real estate to access significant capital.

Other options do not accurately depict how a mortgage functions in real estate. For instance, a loan used exclusively for personal expenses does not incorporate real estate as collateral, while a credit card, even if secured by property, does not fit the traditional definition of a mortgage. Additionally, a loan that requires no collateral does not represent a mortgage, as the very nature of a mortgage relies on the existence of collateral in the form of real estate.