What defines a mortgage?

A mortgage is defined as a pledge of property as collateral for a loan under specific conditions. This definition highlights the critical elements of a mortgage agreement: it involves securing a loan with real property, allowing the lender to take possession of the property if the borrower fails to meet the repayment terms.

In a mortgage arrangement, the borrower retains ownership of the property while the lender holds a security interest in it until the debt is repaid. This creates a legal framework that protects the lender’s investment while also providing the borrower with the necessary funds to purchase or refinance a property.

Understanding this definition is key in the realm of real estate and finance, as it makes clear the nature of the relationship between the borrower and the lender in a mortgage transaction. The other options do not accurately describe a mortgage: a rental agreement pertains to leasing rather than borrowing, a direct purchase agreement refers to outright buying property without financing, and a deed signifies a transfer of ownership rather than a loan security arrangement.