Finance Dictionary
Mortgage
Definition
A legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property.
Deep Dive
A mortgage is a legal agreement by which a bank or other creditor lends money to an individual or entity for the purpose of purchasing real estate (such as a house, land, or commercial property). In exchange for the loan, the borrower grants the lender a lien on the property, meaning the property serves as collateral. The borrower repays the loan, plus interest, over a specified period, typically ranging from 15 to 30 years, through regular installments.
Examples & Use Cases
- 1A first-time homebuyer obtaining a 30-year fixed-rate mortgage to purchase a single-family house
- 2A business securing a commercial mortgage to acquire a new office building for its operations
- 3An existing homeowner refinancing their mortgage to take advantage of lower interest rates, reducing their monthly payments.
Related Terms
CollateralLienReal EstateInterest RateHome EquityForeclosureAmortization