A mortgage is a loan from a bank or a financial institution that enables an individual purchase a real estate property. While it’s possible to take out loans to cover the entire cost of a property, it’s more common to secure a loan for about 80% of the property’s value. The property purchased acts as collateral on the money an individual is lent to purchase the home.

The buyers use mortgages to make large real estate purchases without paying the entire purchase price up front. Over many years, the borrower repays the loan, plus interest, until he or she owns the property free and clear.

In a residential mortgage, a buyer pledges their property to the lender, which has a claim on the property should the buyer default on paying the mortgage. In the case of a foreclosure, the lender may evict the tenants and sell the house, using the income from the sale to clear the mortgage debt.