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Mortgage
A loan used to finance the purchase of a home, with the property serving as collateral for the loan.
More Details
A mortgage is a loan that is used to finance the purchase of real estate, such as a home. Mortgages are typically secured by the property being purchased and are paid back over a fixed period of time, with regular payments of principal and interest.
Example
Imagine that you want to buy a new home and need to borrow money. You might apply for a mortgage from a lender, who will review your credit and financial situation to determine if you are eligible and how much they will lend you. If approved, you would receive the funds in a lump sum and make regular payments to repay the loan, including principal and interest. Mortgages can be a useful way to finance a home purchase, but it is important to consider the terms and make sure you can afford the payments.
Related Terms
Private Mortgage Insurance (PMI)
Insurance that protects lenders in case of mortgage default—typically required if the down payment is less than 20% of the home's purchase price.
Credit Limit
The maximum amount of credit that a financial institution or other lender will extend to a borrower.
Grace Period
A set amount of time after a payment is due during which a late fee will not be charged.