What does a mortgage on real property establish?

What does a mortgage on real property establish?

• A. A contract for sale
• B. A lien on a property
• C. A rental agreement
• D. A warranty deed

Answer: (B)

A mortgage on real property establishes a lien on the property. This means that the mortgage serves as a legal claim on the property that secures the underlying loan used to purchase it. In essence, the mortgage creates a relationship between the borrower and the lender, allowing the lender to have a financial interest in the property until the borrower repays the loan. When a borrower takes out a mortgage, they agree to repay the borrowed amount along with interest over a specified period. If the borrower defaults on the loan, the lender has the right to foreclose the property, which involves taking possession of it to recover their money. This lien does not transfer ownership of the property but rather gives the lender the right to make a claim against it in the event of non-payment. Other options, such as a contract for sale, a rental agreement, or a warranty deed, do not describe the nature of a mortgage. A contract for sale is related to the purchase agreement of the property itself, while a rental agreement pertains to the leasing of property, and a warranty deed is a document that provides legal assurance over the title to property, not a financing arrangement. Therefore, the correct understanding of a mortgage in this context is that it establishes a lien on the property.

A mortgage on real property establishes a lien on the property. This means that the mortgage serves as a legal claim on the property that secures the underlying loan used to purchase it. In essence, the mortgage creates a relationship between the borrower and the lender, allowing the lender to have a financial interest in the property until the borrower repays the loan.

When a borrower takes out a mortgage, they agree to repay the borrowed amount along with interest over a specified period. If the borrower defaults on the loan, the lender has the right to foreclose the property, which involves taking possession of it to recover their money. This lien does not transfer ownership of the property but rather gives the lender the right to make a claim against it in the event of non-payment.

Other options, such as a contract for sale, a rental agreement, or a warranty deed, do not describe the nature of a mortgage. A contract for sale is related to the purchase agreement of the property itself, while a rental agreement pertains to the leasing of property, and a warranty deed is a document that provides legal assurance over the title to property, not a financing arrangement. Therefore, the correct understanding of a mortgage in this context is that it establishes a lien on the property.