Planning to Buy a Home? Compare REALTORS® First. It's Fast and Free!
Thinking of Selling Your Home? Let REALTORS® Compete For Your Business!

A mortgage is a long-term loan used to buy property (i.e. houses, condos, land, businesses). Usually mortgages are financed by banks or other financial institutions. Sometimes a mortgage is financed through the seller of the property. In this case, the property serve as collateral for the loan.

Generally mortgage payments are made monthly. Payments include principal and interest. The principal amount is the amount that goes towards paying-off the loan. The interest amount is the cost of borrowing. Monthly mortgage payments may also include real estate taxes, property insurance, and sometimes Private Mortgage Insurance (PMI).

Before a property is purchased, the buyer can give the lender a sum of cash called a down payment. Down payments reduce the amount of money (principal) that is financed.

Property taxes are based on a percentage of the value of your home. The tax is generally used to help finance the cost of running your community, to build schools, roads, infrastructure and other needs.

Lenders require you to procure home insurance, which covers your home and your personal property against losses from fire, theft, bad weather and other causes. If you put less than 20 percent down on your home purchase, most lenders will charge you Private Mortgage Insurance (PMI) premiums. The coverage protects the lender in case you default on the mortgage.