Massachusetts Real Estate License Practice Test

In a real estate transaction, what does a mortgage convey?

1. Legal title to a property

2. Possession of the property

3. Secured interest in the property

4. Clear title free of all claims

The correct answer is: Secured interest in the property

A mortgage primarily conveys a secured interest in the property. This means that when a borrower takes out a mortgage to buy a home, they grant the lender a security interest in that property. This security interest gives the lender the right to take possession of the property through foreclosure if the borrower fails to meet their repayment obligations. The essence of a mortgage is to create a lien on the property, which is a legal claim that secures the lender's interest. This claim remains in place until the mortgage debt is paid in full. Unlike the legal title—which relates to ownership and can involve transfer of property rights—a mortgage does not transfer actual ownership but rather gives the lender a claim to the property should the borrower default. Understanding this distinction is crucial in real estate transactions, as it highlights the lender's ability to recoup losses through the sale of the property while the borrower retains possession and use of the property until they default on the loan.