Ace the Minnesota Real Estate Exam 2025 – Unleash Your Property Powerhouse!

A mortgage is a legal agreement in which a borrower receives funds to purchase real estate. This arrangement is established between the borrower, who seeks financing to buy a property, and a lender, typically a bank or financial institution, that provides the necessary funds. The real estate itself serves as collateral for the loan, meaning that if the borrower defaults on repayment, the lender has the right to take possession of the property through a process known as foreclosure.

This definition captures the essential components of a mortgage: the purpose of financing real estate transactions and the legal obligations involved. Mortgages are characterized by specific terms, including interest rates, repayment schedules, and the duration of the loan. Understanding the nature of a mortgage is crucial for anyone involved in real estate, whether as a borrower, investor, or real estate professional.

Other options, while related to finance, do not accurately represent the specifics of a mortgage and its function in property transactions.