Mortgage
National Real Estate Exam glossary · Financing
Definition
The instrument by which a borrower pledges real property as security for a loan, creating a lien that the lender may enforce by foreclosure upon default. The mortgage secures the promissory note; the note is the debt, the mortgage is the collateral.
Mortgage in plain English
A mortgage is the legal promise that lets a bank feel safe lending you a huge amount to buy a home: you pledge the property itself as backup, so if you stop paying, the lender can take and sell it (that's 'foreclosure'). Here's the key distinction people mix up — there are actually two documents. The promissory note is the IOU, the actual promise to repay the debt; the mortgage is the collateral, the part that ties that debt to your specific house. Think of it like borrowing money from a friend and handing them the keys to your bike as insurance: the note is your promise to pay, the bike-keys are the mortgage.
Learn these first
Related National Real Estate Exam terms
National Real Estate Exam practice questions · National Real Estate Exam flashcards · National Real Estate Exam study guide