What Is a Mortgage?

A mortgage is a loan used to purchase or maintain a home, plot of land, or other real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments divided into principal and interest. The property then serves as collateral to secure the loan. A borrower must apply for a mortgage through their preferred lender and meet several requirements, including minimum credit scores and down payments. Mortgage applications undergo a rigorous underwriting process before they reach the closing phase. Mortgage Mortgages are offered by traditional creditors, mortgage-specific lenders, and mortgage brokers. Investopedia / Zoe Hansen How Mortgages Work Individuals and businesses use mortgages to buy real estate without paying the entire purchase price up front. The borrower repays the loan plus interest over a specified number of years until they own the property free and clear. Most traditional mortgages are fully amortized. This means that the regular payment amount will stay the same, but different proportions of principal vs. interest will be paid over the life of the loan with each payment. Typical mortgages last for 15 or 30 years, but some mortgage terms can be longer. 1