What type of interest does a mortgage create?

A mortgage creates a security interest in the borrower's property. This means that when a borrower takes out a mortgage, they give the lender a legal right to the property as collateral for the loan. In the event of default - meaning the borrower fails to meet the obligations of the loan, such as making payments - the lender can take possession of the property through a legal process called foreclosure.

This security interest is distinct from ownership interest. The borrower remains the owner of the property and retains the right to occupy and use it, while the lender holds the security interest until the mortgage is fully paid off. The nature of this relationship clearly defines the lender's rights versus the borrower's rights. The borrower must fulfill their obligations under the mortgage, or risk losing the property to the lender.

This concept is fundamental in property law, as it illustrates how secured lending works in real estate transactions. The distinction helps clarify the roles and rights of both parties involved in a mortgage agreement.