What is the primary function of a mortgage?

The primary function of a mortgage is to secure a loan used for purchasing real estate. A mortgage is a legal agreement that involves the borrower pledging their property as collateral to the lender in exchange for funds necessary to buy the property. This means that if the borrower fails to repay the loan, the lender has the right to take possession of the property through foreclosure.

This arrangement benefits both parties: the borrower can acquire real estate without upfront full payment, while the lender mitigates risk by having a secured asset. Additionally, the mortgage typically outlines payment terms, interest rates, and the consequences of default, which further emphasizes its role as a security instrument for the loan.

The other choices do not accurately reflect the primary function of a mortgage. Providing rental agreements pertains to leasing rather than financing, ensuring legal property rights relates more to ownership than to financing mechanisms, and transferring property ownership is a separate legal process from the financial agreement that a mortgage represents.