A true statement about mortgages is that they

A true statement about mortgages is that they

• A. A loan to fund vehicle purchase
• B. A loan to fund property purchase with property as collateral; 10-35 years; negative equity if value < debt
• C. A loan with no collateral
• D. A short-term credit line

Answer: (B)

Mortgages are loans used to buy property, and the property itself serves as collateral. Because the loan is tied to real estate, lenders have security if you default, which is why these loans are long-term—typically repaid over many years, commonly around 10 to 35 years. A key risk is negative equity: if the property’s market value falls below the outstanding loan balance, you owe more than the asset is worth. This combination—property as security, long repayment term, and potential negative equity—matches the true statement. It’s not about funding a vehicle purchase (that would be a car loan), it isn’t an unsecured loan with no collateral, and it isn’t a short-term credit line, all of which do not describe a mortgage.

Mortgages are loans used to buy property, and the property itself serves as collateral. Because the loan is tied to real estate, lenders have security if you default, which is why these loans are long-term—typically repaid over many years, commonly around 10 to 35 years. A key risk is negative equity: if the property’s market value falls below the outstanding loan balance, you owe more than the asset is worth. This combination—property as security, long repayment term, and potential negative equity—matches the true statement.

It’s not about funding a vehicle purchase (that would be a car loan), it isn’t an unsecured loan with no collateral, and it isn’t a short-term credit line, all of which do not describe a mortgage.