What is a mortgage?
A mortgage is a loan used to buy real estate. The property is typically the collateral, meaning the lender can take it if payments aren’t made.
Fixed vs. adjustable rates
- Fixed-rate mortgage: the interest rate stays the same for the term
- Adjustable-rate mortgage (ARM): the rate can change over time based on an index
Down payment & loan-to-value (LTV)
The down payment is the upfront amount you pay. LTV compares the loan to the home’s value. Lower LTV can reduce risk and sometimes improve rates.
Amortization & total cost
Mortgages typically use amortization: your payment includes both interest and principal. Over the full term, total cost depends heavily on rate and term length.
FAQ
What affects mortgage rates? Inflation expectations, central bank policy, credit profile, LTV, and term length.
Should I choose 15 or 30 years? Shorter terms cost less interest but require higher monthly payments.
Do I need mortgage insurance? In some markets, lower down payments may require it—rules vary.