What is the function of a mortgage?

The function of a mortgage is to secure a loan used to purchase real estate, with the property serving as collateral. This means that when a borrower takes out a mortgage, they receive funds from a lender for the purpose of buying a home or investment property. In return, the borrower agrees to repay that loan over a specified period, usually with interest.

The mortgage agreements specify that if the borrower fails to make payments, the lender has the right to foreclose on the property, meaning they can take ownership of it to recoup their losses. This unique arrangement ensures the lender's risk is mitigated by having the property itself as assurance that the debt will be paid.

The other options, while related to real estate, do not accurately describe the primary function of a mortgage. For instance, providing a discount on property taxes pertains to tax laws and incentives, creating a legal title relates to property ownership transfers, and facilitating rental agreements involves leasing rather than borrowing. Thus, the focus on the mortgage as a security instrument is critical to understanding its role in real estate transactions.