A mortgage is a loan used to buy real estate, usually a home, where the property itself serves as collateral. You borrow money from a lender (bank, credit union, or mortgage company) and repay it over time with interest.

Key Components of a Mortgage

1. Principal: The original loan amount borrowed.

2. Interest: The cost of borrowing, expressed as a percentage (interest rate).

3. Taxes: Property taxes may be collected by the lender and paid on your behalf.

4. Insurance: Homeowners insurance protects against damage; private mortgage insurance (PMI) may be required if your down payment is less than 20%.

5. Term: The length of time you have to repay the loan (commonly 15, 20, or 30 years).