alleryStart learning →What is a mortgage loan?
AA short-term loan secured by inventory held
BA long-term loan made against real estate
CA long-term loan with no security pledged
DA short-term loan secured by receivables
Answer & Solution
Correct answer: B. A long-term loan made against real estate
1. A mortgage loan is a long-term loan made against real estate as collateral.
2. The lender takes a mortgage on the property and can seize it, sell it and use the proceeds to pay off the loan if payments stop.
3. Long-term mortgage loans are often used to finance office buildings, factories and warehouses.
4. Life insurance companies are an important source, making billions of dollars of these loans to businesses each year.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.4 Raising Long-Term Financing_
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