New Jersey Real Estate Practice Exam Practice Question
When land owners use their land as security for a loan, the encumbrance created is called
Correct Answer: B
Rationale: When landowners use their property as security for a loan, they create a mortgage or deed of trust lien, which legally ties the property to the loan. This encumbrance ensures that the lender has a claim on the property if the borrower defaults.
Option A, "a special security," is too vague and does not specifically refer to real estate transactions. Option C, "an involuntary lien," refers to liens placed without the owner's consent, such as tax liens, which do not apply here. Option D, "a gratuitous privilege," suggests a non-binding agreement without financial obligation, which is not relevant in the context of secured loans.
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