What financing method allows a buyer to pay for a home over time while using the property as collateral?

What financing method allows a buyer to pay for a home over time while using the property as collateral?

• A. Lease
• B. Loan
• C. Mortgage
• D. Installment plan

Answer: (C)

The correct choice is a mortgage because it is specifically designed as a financing instrument that enables a buyer to purchase a home by borrowing money from a lender. In this arrangement, the buyer agrees to repay the borrowed amount over a set period, typically with interest. A crucial aspect of a mortgage is that the property itself is used as collateral for the loan. This means that if the buyer fails to make the required payments, the lender has the right to foreclose on the home to recover the outstanding debt. While loans can broadly encompass various types of borrowing, including personal or business loans that do not necessarily use the house as collateral, the term mortgage specifically applies to real estate transactions with the property acting as security for the debt. A lease typically refers to a rental agreement and does not involve ownership or collateral, while an installment plan is more general and can apply to various types of purchases, not specifically tied to real estate financing. Therefore, the mortgage aligns with the concept of using the property as collateral while financing the purchase over time.

The correct choice is a mortgage because it is specifically designed as a financing instrument that enables a buyer to purchase a home by borrowing money from a lender. In this arrangement, the buyer agrees to repay the borrowed amount over a set period, typically with interest. A crucial aspect of a mortgage is that the property itself is used as collateral for the loan. This means that if the buyer fails to make the required payments, the lender has the right to foreclose on the home to recover the outstanding debt.

While loans can broadly encompass various types of borrowing, including personal or business loans that do not necessarily use the house as collateral, the term mortgage specifically applies to real estate transactions with the property acting as security for the debt. A lease typically refers to a rental agreement and does not involve ownership or collateral, while an installment plan is more general and can apply to various types of purchases, not specifically tied to real estate financing. Therefore, the mortgage aligns with the concept of using the property as collateral while financing the purchase over time.