What is a mortgage in terms of encumbrances?

A mortgage is defined as a security interest granted to a lender, which means it serves as a legal claim against a property as collateral for the amount borrowed. When a borrower takes out a mortgage to purchase real estate, they agree to give the lender the right to take possession of the property if they fail to repay the loan. This encumbrance allows the lender to protect their investment by ensuring that they can recover the loan amount through the sale of the property if necessary.

Understanding mortgages as encumbrances is crucial in real estate because they affect the property’s title and ownership rights. The mortgage must be satisfied (paid off) before the property can be sold free and clear, illustrating its role in securing debt. In contrast, the other options do not accurately reflect the nature of a mortgage: ownership transfer pertains to conveying property rights, a lease agreement involves rental arrangements rather than securing loans, and property insurance relates to coverage against loss, not a financial claim against the property.