Mortgages are a way to borrow money to buy property. You can get a mortgage to buy a home to live in or a residential property to rent out.
Mortgages are secured against the property you’re purchasing until you’ve repaid what you borrow in full. If you fail to repay the mortgage, your lender can repossess the property and recover their money by selling it.
Due to the fact that mortgages are backed by an asset, the duration of mortgage terms is typically longer compared to other types of borrowing, often ranging from 25 years and, in some cases, extending up to 40 years.
Just like when you borrow money, mortgage lenders charge something called interest. At first, when you start paying off your mortgage, a bigger part of your monthly payments will go towards paying the interest, and a smaller part will go towards actually reducing the loan amount you owe.
As you make payments on your mortgage, the amount you owe will decrease over time. This means that a larger portion of your monthly payment will be allocated towards paying off the loan itself, and less will go towards the interest.