A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money you’ve borrowed plus interest.
Most people who buy a home use a mortgage. A mortgage is a necessity if you can’t pay the full cost of a home out of pocket.
There are some cases where it makes sense to have a mortgage on your home even though you have the money to pay it off. For example, investors sometimes mortgage properties to free up funds for other investments and to take advantage of tax deductions.
The term “loan” can be used to describe any financial transaction where one party receives a lump sum and agrees to pay the money back.
A mortgage is a type of loan that’s used to finance the property. Mortgages are “secured” loans. With a secured loan, the borrower promises collateral to the lender in the event that they stop making payments. In the case of a mortgage, the collateral is the home. If you stop making payments on your mortgage, your lender can take possession of your home, in a process known as foreclosure.