Fundamentals of Surveying (FS) Practice Exam

What defines a mortgage?

1. A promissory note held by a lending agency

2. A conditional conveyance of an estate as a pledge of security of a debt

3. A request for payment of a note

4. A transfer of title

The correct answer is: A conditional conveyance of an estate as a pledge of security of a debt

A mortgage is primarily defined as a conditional conveyance of an estate that serves as a pledge of security for a debt. In practical terms, when a borrower takes out a mortgage to purchase real estate, they are using the property itself as collateral to secure the loan from the lender. This means that the lender gains a legal interest in the property, allowing them certain rights in the event that the borrower defaults on their loan. The nature of this arrangement is crucial; it outlines the obligations of both parties. The borrower conveys some rights to the lender with the understanding that this conveyance is contingent on fulfilling the agreed-upon terms of the debt, including regular payment of principal and interest. If the borrower fails to meet these obligations, the lender can initiate foreclosure proceedings to recover the loan by selling the property involved. This understanding of mortgages highlights their role in real estate financing, distinguishing them from other financial instruments such as promissory notes, which represent a promise to pay a specific amount but do not themselves involve a security interest in property.