What does a mortgage specifically finance?

A mortgage specifically finances real estate purchases, which means it is a loan specifically designed for buying a home or other types of property. When someone takes out a mortgage, they are borrowing money from a lender with the understanding that the property itself acts as collateral for the loan. If the borrower fails to make the required payments, the lender has the right to foreclose on the property and recover their investment.

Mortgages are structured with specific terms that outline how long the borrower has to repay the loan, the interest rate, and the monthly payment schedule. This financing option is often necessary for individuals who do not have enough cash available to purchase real estate outright, as real estate is typically one of the most substantial investments many people will make in their lifetime.