Definition of Mortgage
A mortgage is a legal agreement where a lender provides a home buyer with a loan to purchase a property. The lender charges interest for the use of the mortgage money and will put a lien on the property in order to guarantee repayment. If the mortgage loan is not repaid, the lender can take possession of the property and sell it to collect the amount owing. Once the mortgage loan is repaid, the lien is void.
Why is this term important?
While the term mortgage and loan are used interchangeably, it should be noted that they are not exactly the same. A mortgage is a legal pledge of real property as security to obtain a loan. This loan is then used to purchase the property in the buyer’s name, with a lender’s lien on the property until the mortgage loan is repaid in full.