What is a mortgage in terms of real estate?

A mortgage is fundamentally a legal agreement that allows real estate to serve as collateral for a loan. This means that the property itself is transferred as a security interest to the lender, which ensures that the loan will be paid back. If the borrower fails to meet the repayment terms, the lender has the right to foreclose on the property, which allows them to recover the owed amount through the sale of the secured asset.

In the context of real estate, this mechanism facilitates the purchase and refinancing of property by providing lenders with a security interest, thereby reducing their risk. Borrowers are able to access larger sums of money and finance their real estate purchases, which might otherwise be unaffordable.

The other options presented describe different concepts in real estate. An outright purchase refers to acquiring property without debt, while a rental agreement pertains to leasing rather than owning. An insurance policy protects against loss or damage to property but does not involve the financing aspect characteristic of a mortgage. Thus, the concept of a mortgage is correctly represented as a transfer of real estate to secure a debt.