What is a mortgage?

A mortgage is best defined as a long-term loan specifically used to finance real estate. This type of loan allows individuals to purchase homes or other properties without having to pay the full price upfront. Instead, the borrower borrows a significant amount of money from a lender, often a bank or credit institution, and agrees to repay it over a set period, typically extending from 15 to 30 years.

The property itself serves as collateral for the loan, meaning that if the borrower fails to make the necessary payments, the lender has the right to take possession of the property through a legal process known as foreclosure. This structure provides a way for people to invest in real estate while spreading the cost over many years, making home ownership more accessible.

Other options describe loan types that do not relate to real estate financing or loans secured by property. For instance, personal loans and credit cards serve different purposes, such as covering immediate expenses or managing everyday credit needs, but they do not specifically involve purchasing property. Additionally, a loan focused on increasing credit scores does not accurately reflect the nature of a mortgage, which primarily facilitates property investment rather than directly affecting credit scores.