What a Mortgage Is

A mortgage is a loan used to buy real estate, with the property itself serving as security for the lender. If the borrower does not repay according to the agreement, the lender may have the legal right to take the property through foreclosure or another recovery process.

This lesson explains the basic purpose of a mortgage, how it differs from a regular loan, and the main parts of a mortgage contract: the principal, interest, term, repayment schedule, and collateral. It also introduces why mortgages are structured differently from most consumer debt and why they are evaluated so carefully by lenders.