What does a mortgage involve?

A mortgage involves a loan agreement where the property serves as collateral. This means that when an individual takes out a mortgage, they are borrowing money to purchase a property, and in return, they pledge that property as security for the loan. If the borrower fails to repay the loan according to the agreed terms, the lender has the right to take possession of the property through a legal process known as foreclosure. This highlights the fundamental relationship between the borrowed funds, the obligation to repay them, and the property that secures that loan.

The other choices do not accurately represent what a mortgage entails. A grant of land from the state refers to a completely different legal concept related to the transfer of ownership or rights to land. A type of rental agreement suggests a lease arrangement rather than a loan secured by property. Lastly, a method of property appraisal involves assessing the value of a property, which is typically part of the mortgage process but is not the definition of a mortgage itself.