What is a mortgage?

A mortgage is a loan that allows individuals or couples to purchase a home or property. It is typically provided by a lender, such as a bank or mortgage company, and is secured by the property itself. The borrower agrees to make regular payments over a specified period to repay the loan.

Why do people need mortgages?

Most people need mortgages because buying a home or property outright with cash is not feasible for many. Mortgages allow individuals to spread the cost of purchasing a home over a longer period, usually several years. This makes homeownership more accessible by providing the necessary funds upfront while allowing borrowers to repay the loan over time.

How does a mortgage work?

A mortgage works by providing borrowers with funds to purchase a property while using the property itself as collateral. The borrower pays a down payment (a percentage of the property's price) and enters into an agreement with the lender to repay the remaining loan amount over a set term, typically in monthly installments. Interest is charged on the loan, which is included in the monthly payments.

Different types of mortgages (fixed-rate, adjustable-rate, FHA, VA, etc.)

There are several types of mortgages available, each with its own characteristics. Fixed-rate mortgages have a consistent interest rate throughout the loan term, providing stability and predictable payments. Adjustable-rate mortgages (ARMs) have an interest rate that can change periodically, usually after an initial fixed-rate period. Government-backed mortgages, such as FHA (Federal Housing Administration) and VA (Department of Veterans Affairs) loans, have specific eligibility requirements and may offer advantages like lower down payments or more flexible terms.