What type of loan is used to finance real estate, giving the lender first claim on the property?

A mortgage is specifically designed for financing real estate transactions. It involves a legal agreement where the borrower receives funds from a lender to purchase property, with the property itself serving as collateral. This means that if the borrower fails to repay the loan, the lender has the right to take possession of the property through a process known as foreclosure.

The characteristic of giving the lender the first claim on the property is crucial, as it secures the lender's investment by ensuring they can recover the loan amount by selling the real estate. Mortgages typically come with long repayment terms and lower interest rates compared to other types of loans, making them a common choice for acquiring residential or commercial property.

Other types of loans, such as lines of credit, personal loans, or business loans, do not inherently use real estate as collateral and do not typically provide the same security or ownership rights tied directly to the property being financed. Thus, while these other forms of financing may serve various purposes, they do not have the same legal structure and security features associated with a mortgage.