What type of financing allows the lender to take possession of the property if the borrower defaults?

A mortgage is a type of financing that gives lenders the right to take possession of the property through the foreclosure process if the borrower defaults on the loan. In the context of real estate transactions, a mortgage is a legal agreement where the borrower pledges the property as collateral to secure the loan. If the borrower fails to make the required payments, the lender can initiate foreclosure proceedings to reclaim the property, thereby protecting their investment.

In contrast, a home equity line of credit typically allows homeowners to borrow against the equity in their home but operates differently than a traditional mortgage regarding possession rights. A second mortgage is also a secured loan but, similar to a home equity line of credit, does not imply direct possession and relies on the primary mortgage for its rights. A lease purchase agreement, on the other hand, involves a tenant leasing a property with the option to buy it later, but it does not give the lender any rights to possession in case of default as it pertains to rental payments rather than loan obligations.

This understanding of mortgages is crucial in real estate transactions, as it delineates the responsibilities and rights affecting both lenders and borrowers.