What is a mortgage loan?
A mortgage is a secured loan from a bank or other financial company that makes it possible to buy a home without having to cover the total cost yourself. While every mortgage has different characteristics, they’re all comprised of three basic parts:
- The loan term. This is the amount of time you have to pay back your loan. Common terms are 15 or 30 years. The shorter the loan term, the less interest you’ll pay.
- Interest rate type. Mortgage interest rates can either be fixed or adjustable. Adjustable-rate home loans often have lower rates at the beginning, whereas fixed-rate loans offer more payment predictability.
- Loan type. The most common types of home loans are:
- Conventional: Multiple types available
- Government-backed: FHA, VA, USDA
- Loans for high-wealth individuals, investors and retirees: Jumbo loans, reverse mortgages and more