What do we call an agreement that allows a borrower to retain ownership of a property during the loan period?

The correct answer is related to the concept of lien theory, which pertains to how ownership of property is treated in the context of a mortgage. Under lien theory, when a borrower takes out a mortgage to buy a property, they retain legal title to the property, while the lender holds a lien as security for the loan. This means the borrower can live in and use the property while making mortgage payments, effectively maintaining ownership during the loan period.

Lien theory contrasts with title theory, where the lender holds the title to the property until the loan is fully paid off. Understanding lien theory is crucial for recognizing the rights and responsibilities of both borrowers and lenders during the financing period. This framework explains why the borrower has the right to occupy and manage the property even though there is a loan secured by it.

While lease options involve a rental agreement with a potential purchase, and mortgage assumptions pertain to the process of assuming an existing mortgage, these concepts do not accurately capture the essence of retaining ownership during a loan period as lien theory does.