What is the primary purpose of a budget mortgage for lenders?

The primary purpose of a budget mortgage for lenders is to ensure that payments on items affecting the lender's security are made consistently and on time. This type of mortgage typically requires the borrower to contribute to an escrow account for property taxes and insurance, in addition to the principal and interest payments. By securing these payments in advance, lenders minimize their risk and ensure that the property remains insured and any tax obligations are met, ultimately protecting their investment in the loan.

Other options may seem plausible but do not directly align with the core purpose of a budget mortgage. Offering competitive rates, for instance, is more about market positioning than the structural function of a budget mortgage. Similarly, minimizing paperwork or enabling borrowers to secure larger amounts is not the primary consideration; rather, these aspects relate to borrower convenience and loan structuring rather than the specific intent of a budget mortgage itself.