What is a purchase-money mortgage?

A purchase-money mortgage is specifically designed to facilitate the financing of a property when a buyer purchases real estate. This type of mortgage integrates the borrowing of funds needed to buy a property within the same transaction. It is directly tied to the purchase of the home or real estate, which makes it distinct from other types of loans, such as refinancing or personal loans.

In essence, when an individual acquires a property and uses this form of mortgage, the funds are allocated specifically for that purchase, enabling the buyer to pay the seller directly. This highlights the role of a purchase-money mortgage as not just an ordinary loan, but as a financial product aimed at facilitating property ownership. The other options do not capture this specific function, as they relate to refinancing, personal improvement projects, or purchasing second homes but do not emphasize the direct relationship to financing a primary property purchase.