What type of financial agreement is a mortgage?

A mortgage is fundamentally a financial agreement where a borrower obtains funds specifically for the purpose of purchasing real estate or property. This arrangement involves the lender providing a certain amount of money, which the borrower agrees to pay back over an extended period, typically with interest. The property itself usually serves as collateral, meaning if the borrower fails to make the required payments, the lender has the right to seize the property through a legal process known as foreclosure.

This structure is significant within real estate transactions, as it enables individuals to acquire homes or other properties without needing to pay the full purchase price upfront. The implication of this financial tool extends beyond just borrowing money; it embodies the relationship between lenders and borrowers and the foundational role that mortgages play in the real estate market.

In contrast, the other choices represent different concepts. A long-term lease agreement pertains to the rental of property and does not involve financing or ownership. An investment plan for income properties refers to strategies for making money through real estate but does not specifically relate to the borrowing aspect. A type of insurance policy covers risks, rather than serving as a means of financing property purchases. Thus, the essence of a mortgage aligns entirely with borrowing funds to acquire property.