Mortgage

A mortgage is a loan secured by real estate, typically used to purchase a home. The borrower conveys a security interest in the property to the lender, who holds a lien until the loan is repaid. If the borrower defaults, the lender may foreclose to recover the outstanding balance.

A typical mortgage is repaid in equal installments over a term, such as 15, 20, or 30 years. Each payment usually covers both principal and interest, and may include amounts for property taxes and homeowners insurance held in an escrow account. The down payment influences the size of the loan, the interest rate, and the amount of initial equity in the property.

Common types include fixed-rate mortgages, which keep the interest rate constant for the term; adjustable-rate mortgages, which carry a variable rate after an initial period; and government-backed programs (such as FHA, VA, or USDA loans) that provide insured options and support for certain borrowers. There are also specialized forms such as interest-only, balloon, and reverse mortgages used in particular circumstances.

Process wise, borrowers apply and lenders assess credit, income, and debt. A property appraisal establishes value, and underwriting evaluates risk. Upon approval, closing transfers funds and records the mortgage lien. Lenders often require mortgage insurance when the down payment is small or the loan-to-value is high.

Risks and considerations include interest rate changes that affect payments, the potential loss of home equity through foreclosure, and fees or closing costs. Refinancing can alter the rate or term to reduce payments or total interest if market conditions and finances permit.

Regulation and markets vary by jurisdiction but generally involve oversight of lending practices, disclosure requirements, and, in many systems, mortgage-backed securities and government programs that influence access and cost.