Similarly, they lend the fund to clients needing funds in return of higher interest rates than they pay to their customers for the deposits. However, while advancing the funds to the clients, they take collateral from them for the period of the loan and until the principal amount, as well as interest, is recovered in full. Hence, mortgaging a house with the bank is also a form of loan where the collateral is the house that you keep with the bank. In case, you are unable to repay the loan, the bank will sell your property to recover the loan. The authority of the bank to deal with the mortgaged property depends upon the nature of the mortgage you have undertaken.