What is a mortgage?
A mortgage is a type of loan taken out by a borrower to assist with the purchase of a home. The lender (usually a financial institution) gives the borrower access to funds under the promise that the borrower will pay it back as per specified repayment arrangements and terms. There is a cost to a mortgage—the lender will charge the borrower interest or service charges, depending on the agreement.
How much interest you pay depends on three factors:
- How much you borrow (the principal)
- The interest rate on the loan
- How long you take to pay it back (the amortization period)