What does the term "default" refer to in the context of mortgages?

In the context of mortgages, the term "default" specifically refers to the failure to fulfill the loan obligations, such as missing scheduled payments or failing to adhere to the terms of the mortgage agreement. When a borrower defaults, it indicates that they have not met their contractual obligations, which can trigger various consequences, including foreclosure proceedings initiated by the lender.

Understanding what constitutes default is crucial for borrowers and lenders alike, as it can significantly impact the borrower’s credit rating and the lender’s ability to recoup the funds lent. It is important to recognize that default is not related to making payments ahead of schedule, modifying loan terms, or the type of mortgage product that is in place, such as adjustable-rate mortgages. These concepts are separate and do not capture the essence of default in a mortgage context.