Glossary

Mortgage (Security Instrument)

Also known as: Mortgage

A two-party legal instrument in which a borrower (mortgagor) grants a lender (mortgagee) a lien against real property as security for repayment of a debt, without conveying legal title to the lender.

Under the lien theory followed by most U.S. states, a mortgage creates only a lien against the property in the lender's favor — the borrower retains legal title throughout the loan term — which distinguishes it from a deed of trust's three-party title-transfer structure, though the two instruments are often used loosely as synonyms in casual CRE conversation. A small number of states follow title theory or an intermediate theory, under which the mortgagee technically holds legal title (or a defeasible title) until the debt is repaid, though the practical differences from lien theory are narrow in modern practice. The mortgage is recorded in the land records to establish lien priority and provide public notice, and it is typically accompanied by a separate promissory note that evidences the underlying debt obligation, with the mortgage serving purely as the collateral security for that note.