Definition
A mortgage is a loan used to buy a home. It's a legal agreement where the home serves as collateral, and the borrower repays the loan amount plus interest over a set period.
Understanding Mortgage Basics
A mortgage comes into play when buying a home. It's a loan secured by the property itself. Imagine a $300,000 house where you pay $60,000 upfront (example). The mortgage covers the remaining $240,000. Over time, you repay the lender with interest. This makes homeownership possible even without full cash upfront. It's not a one-time payment; it's a long-term commitment with monthly installments. Contrary to some beliefs, a mortgage doesn't mean you own the home outright until it's fully paid off. Instead, it's a way to gradually gain ownership while living in the house.
