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According to property law, a mortgage is a lona that occurs when an owner pledges his interest in a particular property as a collateral for an additional loan. The mortgage is an encumbrance on the property. Like other types of loans, mortgages also have an interest rate pre determined and agreed upon and are scheduled to be repaid in full over a set period of time.

A mortgage secures all types of real estate and the interest rate reflects the lender’s risk. Mortgage lending is a mechanism to finance private ownership of property, residential and commercial. The terminology does differ from country to country, but the basic components are almost always similar. The property being financed and the exact form of ownership could vary from country to country. The security created on the property by the lender includes certain restrictions on the use or disposal of the property. The person borrowing the finance creates an ownership interest in the property.