@Furgar #2 is partially correct in that the bank never "gives you" the money. The funds are transferred to the seller of the property for which you have acquired a mortgage. They don't pass on "an IOU or bad debt" (there is no definition of bad debt mentioned here) to you to someone else any more than when you pay via cheque for an electric bill. You don't repay the loan with "REAL money" any more than they pay the former owner of the property.