What Is a Mortgage?
A mortgage is a type of loan specifically used to purchase property. Typically, the buyer borrows money from a lender, often a bank or financial institution, to cover the cost of the home. The borrower agrees to repay the loan in installments, which include both the principal (the original amount borrowed) and the interest charged by the lender. Mortgages are secured loans, meaning the property itself acts as collateral. If the borrower fails to repay the loan, the lender can take ownership of the property through foreclosure.
Types of Mortgages
There are various types of mortgages available, each designed to suit different financial situations. The most common are fixed-rate and adjustable-rate mortgages (ARMs). With a fixed-rate mortgage, the interest rate stays the same for the entire term of the loan, providing predictable monthly payments. In contrast, an ARM offers an interest rate that can fluctuate, typically starting lower but increasing over time. Other mortgage options include government-backed loans like FHA or VA loans, which offer benefits for first-time homebuyers or veterans. Understanding these options can help borrowers choose the best mortgage type for their needs. What happens fixed rate mortgage ends