What is a mortgage?

What is a mortgage?

• A. A type of secure checking account
• B. A loan used specifically for purchasing real estate
• C. A savings account for long-term investments
• D. A personal loan for daily expenses

Answer: (B)

A mortgage is a loan specifically designed for the purpose of purchasing real estate. It is secured by the property itself, meaning that the property serves as collateral for the loan. This arrangement allows individuals to buy homes or other types of real estate without having to pay the full purchase price upfront. Instead, borrowers make regular payments over time, which typically include both principal and interest. When the borrower fails to meet the repayment terms, the lender has the right to take possession of the property through a legal process known as foreclosure. Mortgages usually have specific terms concerning the interest rate, repayment schedule, and duration, commonly 15 or 30 years. The other options pertain to different financial products that do not specifically relate to real estate financing. Secure checking accounts, savings accounts, and personal loans are designed for various banking purposes but do not involve the purchase of real estate or the same structured repayment terms associated with mortgages. Therefore, the correct answer accurately captures the unique and specific nature of a mortgage in the banking and finance context.

A mortgage is a loan specifically designed for the purpose of purchasing real estate. It is secured by the property itself, meaning that the property serves as collateral for the loan. This arrangement allows individuals to buy homes or other types of real estate without having to pay the full purchase price upfront. Instead, borrowers make regular payments over time, which typically include both principal and interest.

When the borrower fails to meet the repayment terms, the lender has the right to take possession of the property through a legal process known as foreclosure. Mortgages usually have specific terms concerning the interest rate, repayment schedule, and duration, commonly 15 or 30 years.

The other options pertain to different financial products that do not specifically relate to real estate financing. Secure checking accounts, savings accounts, and personal loans are designed for various banking purposes but do not involve the purchase of real estate or the same structured repayment terms associated with mortgages. Therefore, the correct answer accurately captures the unique and specific nature of a mortgage in the banking and finance context.