What type of loan is typically used to purchase property and is paid back over a long term?

• A. Lease
• B. Bank loan
• C. Mortgage
• D. Grant

Answer: (C)

A mortgage is a specific type of loan that is designed for the purpose of purchasing real estate, such as a home or other property. This type of loan is characterized by its long repayment period, often extending from 15 to 30 years, allowing borrowers to manage large amounts of debt over time.

Mortgages are secured loans, meaning that the property itself serves as collateral for the loan; if the borrower fails to make the required payments, the lender can take possession of the property through foreclosure. This reduces the risk for lenders, allowing them to offer lower interest rates compared to unsecured loans.

In the context of financing a property purchase, a mortgage is preferred for its structured repayment plans and long terms, making it more accessible for individuals to acquire homes without needing to pay the entire purchase price upfront. This makes mortgages distinct from a lease, which grants the right to use property without ownership, a bank loan, which can be used for various purposes without a focus on property, and a grant, which involves receiving funds that do not require repayment.