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Most real estate transactions are financed through loans secured by mortgages on the property. A mortgage involves the transfer of an interest in land as security for an obligation, and is typically repaid in installments that include both interest and principal payments.

If mortgage payments are not made on schedule, the lender can foreclose on the mortgage and demand that the entire mortgage debt be paid immediately. If the borrower cannot pay, the property interest may be sold; however, the actual foreclosure process depends on state law, the terms of the mortgage, and whether other liens exist on the property. Many states allow late payments to avoid foreclosure, and many lenders work out payment plans with borrowers before resorting to foreclosure.