Mortgage

Definition of Mortgage

A mortgage, also known as a housing loan, is a financial arrangement provided by lenders to enable individuals or families to purchase or build residential properties.

It involves borrowing a substantial amount of money to cover the property's cost and repaying it over an agreed-upon period, often with interest. The property itself serves as collateral, providing security to the lender.

What is Mortgage?

A mortgage is a substantial financial assistance package that helps individuals realize their homeownership dreams.

It allows borrowers to acquire or construct residential properties by borrowing a significant portion of the property's value from a financial institution.

The borrower commits to repaying the loan over time, usually through monthly installments that encompass both principal and interest.

Types of Mortgage

Mortgage come in various forms, including fixed-rate mortgages, where the interest rate remains constant over the loan term; adjustable-rate mortgages, where the interest rate may change periodically; government-backed loans like FHA or VA loans; and jumbo loans for high-value properties.

Down payment requirements, interest structures, and terms can differ based on the loan type.

What are examples of Mortgage?

Consider an individual who wants to purchase a $250,000 home. They secure a 30-year fixed-rate housing loan with a 4% annual interest rate.

They make a 20% down payment ($50,000) and borrow the remaining $200,000. Over 30 years, they pay off the loan in monthly installments, covering both principal and interest.

This housing loan allows them to own the property while spreading the cost over an extended period, making homeownership more accessible.