What is a Mortgage?
A mortgage is a loan used by individuals to purchase real estate. It is typically a long-term financial agreement between the borrower and a lender, where the borrower pledges the property as collateral. The borrower agrees to repay the loan in monthly installments, which include both principal and interest, over a specified period. Mortgages can be used for purchasing homes, commercial properties, or even land. There are various types of mortgages available, such as fixed-rate, adjustable-rate, and interest-only mortgages, each offering different terms and conditions to suit the borrower’s needs.
How Do Mortgages Work?
The way a mortgage works involves the borrower making regular payments to the lender until the loan is paid off. Initially, the majority of the payments go toward interest rather than the principal balance, but over time, the balance of the principal gradually decreases. If the borrower fails to make payments, the lender has the right to foreclose on the property, meaning they can seize and sell it to recover the loan amount. Mortgages come with terms such as interest rates, loan duration, and monthly payment schedules that vary depending on the lender and the type of mortgage chosen. What happens fixed rate mortgage ends