What is a mortgage?

A mortgage is a security instrument to secure a loan made against real property. In the United States its not uncommon to refer to a real estate loan as a Mortgage.

Mortgages are necessary because they provide the ability to borrow money against real estate. This money can be used to buy a home to live in, finance the acquisition of an office building or the construction of a new housing development.

A mortgage provides security to lenders. A lender may allow a borrower to obtain as much as 100% of the value of their real property. If the borrower were to default and not pay back the lender. The lender can easily sell the property to recover their costs.

A mortgage provides both the ability to borrow money and security for lenders. This is necessary in order to keep the flow of money in the economy which both creates jobs and financial stability.