Although most wish to buy a property with only their own money, not many first-time buyers are affluent enough to do so. Thus, in order to finance the property, they decide to take out a mortgage.
In layman’s terms, a mortgage is a type of loan that’s secured against a property someone wants to buy. When someone says they have a mortgage, it means they had to borrow an amount of money in order to buy the home, and they now have to give it back, i.e., repay it.
Before getting a mortgage, the buyer agrees to a repayment schedule, which is decided based on what the buyer can afford. However, if they fail to make payments and respect the schedule, they may lose their home, as it can be repossessed.
Thus, we can also say that a mortgage is a form of security. In order for the lender to be sure their money will be paid back, they have to set up some ground rules to get the payments. In addition, they also charge either a fixed or a variable interest rate on the loan.