A mortgage is a loan provided by a lender or bank that allows a person to purchase a home or property. It is usually taken out to cover the full cost of the home, but it is more common to get a loan for around 80% of the home's value. The borrower agrees to pay the lender over time, usually in a series of regular payments that are divided into principal and interest. The property then serves as collateral to secure the loan. In a nutshell, a mortgage is the loan you request to pay off a house or other real estate.
Given the high costs of buying a property, almost all homebuyers require long-term financing to buy a home. Mortgages generally have a fixed rate and are repaid in 15 or 30 years. Most people think of buying a home in terms of square footage or location, but understanding mortgages is essential to securing a fair price for what you buy. The main part of the mortgage is the amount you pay for the outstanding amount of your loan. Interest is the cost of borrowing money and the amount you pay is determined by your interest rate and the balance of your loan.
When you apply for a mortgage, you agree to repay the money you borrowed at an agreed interest rate.
