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A mortgage is a loan secured by real estate: the borrower receives funds to buy or use property, while the lender obtains a legal security interest (a lien) in that property. If the borrower defaults or fails to meet the mortgage terms, the legal mechanism allows the lender to take possession and sell the property through foreclosure or repossession to recover the debt. In civil-law jurisdictions, the arrangement is often described as a hypothec loan, while in Anglo-American systems it is commonly treated as a pledge of the borrower’s property interest as collateral. Legally, the mortgage creates an encumbrance on the property and gives the lender priority over most other creditors. This means that in bankruptcy or insolvency, other creditors are generally repaid only after the mortgage lender has been paid in full from the sale of the secured property. Mortgage lending is typically regulated by governments, and the core legal components are the property being secured, the mortgage/security interest, the mortgagor (borrower), the mortgagee (lender), the principal and interest obligations, and the foreclosure/recovery rights that make the loan truly “mortgage” rather than an unsecured loan.
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