What Is a Mortgage?
A mortgage is a loan specifically used to purchase real estate. It allows individuals to buy homes without paying the full price upfront. Instead, the borrower agrees to repay the loan over time, usually in monthly installments. The loan amount is typically secured by the property itself, meaning if the borrower fails to repay, the lender has the right to foreclose on the property. Mortgages are often long-term commitments, spanning 15 to 30 years, and come with varying interest rates, making it essential for buyers to understand their terms before agreeing.
Types of Mortgages and How They Work
There are several types of mortgages, with the most common being fixed-rate and adjustable-rate mortgages (ARMs). A fixed-rate mortgage has a constant interest rate for the entire term, offering predictability in monthly payments. In contrast, an ARM has an interest rate that may change over time, which can lead to fluctuating payments. Borrowers should weigh their options based on their financial situation and long-term plans. It’s also important to shop around for the best rates and understand any additional costs like taxes and insurance that may affect the overall monthly payment. What happens fixed rate mortgage ends