What Is a Mortgage?

A mortgage is a type of loan used to purchase or refinance real estate. It allows you to borrow money to buy a home and repay it over time, typically over 15 to 30 years.

How mortgages work

With a mortgage, a lender provides funds to buy a property, and the home itself serves as collateral. You repay the loan in monthly payments that include both principal and interest.

If payments aren’t made, the lender may have the right to foreclose on the property.

Key parts of a mortgage

• Loan amount (home price minus down payment)
• Interest rate (APR)
• Loan term (commonly 15 or 30 years)
• Monthly payment

Types of mortgages

Mortgages come in several forms, including fixed-rate mortgages, adjustable-rate mortgages (ARMs), and government-backed loans like FHA and VA loans.

Where mortgages come from

Mortgages are offered by banks, credit unions, mortgage lenders, and online lenders. Shopping around can help you find better rates and terms.

Is a mortgage right for you?

A mortgage makes homeownership possible for many buyers, but it’s a long-term financial commitment. Choosing a loan you can comfortably afford is essential.