Mortgage
Definition:
A Mortgage is a loan used to purchase or refinance real estate, where the property itself serves as collateral. Mortgages are typically long-term loans, with repayment periods ranging from 15 to 30 years. The borrower makes monthly payments that include both principal and interest, and failure to repay the loan can result in foreclosure.
🔍 Did You Know?
Mortgages come in various forms, including fixed-rate, adjustable-rate (ARM), FHA loans, and VA loans, each with different terms and requirements for borrowers.
Examples:
Example 1:
A homebuyer takes out a 30-year fixed-rate mortgage at 4.5% interest to purchase a $300,000 home, with a monthly payment of $1,520, including principal and interest.
Example 2:
A real estate investor uses a commercial mortgage to purchase a multi-family property, repaying the loan over 20 years while collecting rental income from tenants.
Why It’s Important:
Mortgages are the most common way to finance real estate purchases, making them critical for homebuyers, investors, and developers. Understanding mortgage options and terms is essential for making informed financial decisions.
Who Should Care:
- Homebuyers seeking long-term financing.
- Real estate investors using leverage to finance properties.
- Lenders offering a range of mortgage products to borrowers.
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