A mortgage (Law French for “dead pledge”) is a type of loan to finance the purchase of real estate by contract, where there is an agreement to give up an interest in something if you fail to perform some duty. It is used as a method by which individuals or businesses can buy residential or commercial property without paying the full value upfront. The borrower (mortgagor) gives the lender (mortgagee) a lien on the property as collateral (also called hypothecation) for the loan. The mortgagor’s lien on the property expires when the mortgage is paid off in full.
Mortgage and “home loan” are often used interchangeably. However, the mortgage is really the agreement that makes your home loan work; the bank will not lend you hundreds of thousands of dollars unless they knew they could claim your home in the event of your default.