A mortgage is formally defined as the transfer of an interest in a property for the purpose of securing a debt. This debt is usually a loan that the buyer uses to purchase the property. Mortgages are a common method of acquiring a property when the buyer is unable to buy it outright.
Implementation
The owner of the property transfers an interest in that property to the lender. The lender typically provides a loan to the owner that has the same value as the transferred interest in the property. This interest in the property will be returned to the property's owner once the owner has repaid the loan.
Details
The lender doesn't actually receive ownership of the property in most mortgages. The borrower remains the property's owner, although the lender does gain certain rights to the property. The purpose of these rights is to allow the lender to secure the loan. This generally means that the mortgage lender is able to possess and sell the property if necessary to recover the loan.
Purpose
The purpose of a mortgage is to allow a person to purchase a property they would otherwise be unable to afford. This property is typically real estate and is the only type of property that may be mortgaged in some jurisdictions. A mortgage typically results in a loan, and many people refer to this loan as a "mortgage." However, this term actually refers to the interest in the property that secures the loan rather than the loan itself.
Foreclosure
A foreclosure occurs when the lender takes possession of the property for the purpose of selling it. This may become necessary when the borrower defaults on the loan. All mortgages in the United States give the mortgage holder the right to foreclose, although this isn't always the case in other countries.
Recovery
The proceeds from the sale of a house may not always be sufficient to cover the balance of the loan. The lender may be entitled to recover the outstanding debt directly from the borrower in some jurisdictions.
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