What Is A Mortgage Loan?

1. Mortgage

A mortgage is a loan given by a bank or financial institution to purchase real estate. A mortgage is secured by collateral (real property) and is payable over time according to a repayment schedule. Mortgages are generally classified as either fixed-rate or adjustable rate mortgages.

2. Interest Rate

Interest rates are the fees charged by banks or lenders for using their money. When you take out a home loan, you agree to pay interest on the amount borrowed each month until the loan is paid off. You may choose between two types of interest rates: variable and fixed. Variable interest rates change throughout the day based on market conditions. Fixed interest rates don't fluctuate.

3. Principal

Principal is the total amount borrowed at the beginning of the loan.

4. Term

Term refers to the length of time you have to repay the loan. Most loans are repaid over 30 years.

5. Payment Schedule

Payment schedules refer to how much you'll owe monthly. There are three basic payment schedules: fixed payments, biweekly payments, and weekly payments.

6. Repayment Schedule

Repayment schedules determine how long you have to make your payments. Most people use the standard 60-month repayment plan. However, some people choose to pay back their homes early.

7. Down Payment

Down payments are amounts of cash you put down on a house before closing. The larger your down payment, the lower your monthly mortgage payments will be.

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