Which statement best defines a mortgage?

Which statement best defines a mortgage?

• A. A loan secured with the creditor's claim on the property of the borrower
• B. An unsecured personal loan
• C. A line of credit with flexible repayment
• D. A lease arrangement for equipment

Answer: (A)

A mortgage is a loan backed by real estate, with the lender having a claim (lien) on the property as collateral. This means if the borrower doesn’t keep up payments, the lender can take the property through foreclosure to recover what’s owed. The other scenarios don’t fit a mortgage: an unsecured personal loan has no collateral, a line of credit is a revolving borrowing arrangement, and a lease is a rental agreement, not an ownership-backed loan. In farming, mortgages are commonly used to finance land or buildings, leveraging the property itself to secure the loan.

A mortgage is a loan backed by real estate, with the lender having a claim (lien) on the property as collateral. This means if the borrower doesn’t keep up payments, the lender can take the property through foreclosure to recover what’s owed. The other scenarios don’t fit a mortgage: an unsecured personal loan has no collateral, a line of credit is a revolving borrowing arrangement, and a lease is a rental agreement, not an ownership-backed loan. In farming, mortgages are commonly used to finance land or buildings, leveraging the property itself to secure the loan.