A mortgage can be defined as a loan you obtain for payment of a house and all of its property. The lender and loan taker are in such a relationship where the loan taker must complete all of the mortgage payments or the house is given to the lender. Taxes, insurance, interest and principal are everything a loan is consisted of. Interest is a percentage the lender profits from, which is based on economic indicators, while the principal is the actual amount of money you borrowed. Interest and principal make up most of the payment.

The sheer scale of the loan dictates that such amounts must be paid in a longer period of time such as 15 or 30 years. Getting your housing situation sorted is no small feat, and as such it can bring financial stress. Although it doesn’t have to be like that if you pick a plan with good interest rates over a given period of time. This given period of time is called the term.

All you need to know about mortgages


Amortization is the process of equally dividing the payments over said period of time. Usually, with amortization, payment portions will go more towards interest at the start of the loan, and they will go towards the principal in the later stages of the loan. In most cases, if you have less than 20 percent down, the lender requires you to include private mortgage insurance in your payment. This is then added to the established interest and principal amounts for the monthly payments. The bank is given the option of foreclosing if at any time the loan taker stops paying the mortgage.


Some mortgages need pre-approval, which is a process in which the lender gathers up information about the loan taker’s employment and financial standings, along with a credit check. This way the lender has a clear sight of the risk involved with taking such a client. This is not to be confused with pre-qualification, which is process of general information gathering essential for any loan, no matter the amount. In short, a mortgage is a debt tool that is secured by a real estate property, where the loan taker needs to pay the loan with a predetermined set of payments. Mortgages are most effective when buying large real estate because of the financial weight of paying it all at once. Other names used for mortgages are “claims on property” and “liens against property”.