Last updated: Nov 4, 2023
Mortgage calculatorA mortgage is a financial arrangement in which a person borrows money from a bank or a lending institution to purchase a home or other real estate property. The property itself serves as collateral for the loan, which means that if the borrower fails to make mortgage payments, the lender can take possession of the property through a legal process known as foreclosure.
Mortgage payments typically consist of two parts: the principal and the interest. The principal is the original amount of money borrowed, while the interest is the cost of borrowing that money. Mortgage payments are usually made on a monthly basis, and they are designed to gradually pay off the principal balance while covering the interest charges. Over time, as the borrower makes consistent payments, the amount of interest paid decreases, and the amount applied to the principal increases. This process is known as amortization.