Learn / What Is a Mortgage?
What Is a Mortgage?
A mortgage is a loan used to buy a home, secured by the home itself. You repay it over time, and the lender holds a claim on the property until it is paid off.
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The basic idea
You borrow money to buy a home and agree to pay it back with interest over a set number of years, usually 15 or 30. Because the loan is secured by the home, the lender can take the property if the loan is not repaid, which is why mortgage rates are lower than unsecured loans.
The four parts of a payment
A monthly mortgage payment often has four parts, called PITI:
- Principal: the amount that pays down what you borrowed.
- Interest: the cost of borrowing.
- Taxes: property taxes, usually collected monthly.
- Insurance: homeowners insurance, and mortgage insurance if your down payment is small.
Term and amortization
Most mortgages are fully amortizing, meaning each payment covers interest plus a little principal, and the balance reaches zero at the end of the term. Early on, most of the payment is interest; later, most is principal.
Put it into numbers. The calculator estimates your payment and compares every loan type.
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Frequently asked questions
How does a mortgage work?
You borrow money to buy a home and repay it monthly with interest over 15 to 30 years. The home secures the loan until it is paid off.
What is PITI?
Principal, interest, taxes, and insurance, the four parts of a typical monthly mortgage payment.
How much do I need to put down?
As little as 0% with VA or USDA, 3% to 3.5% with conventional or FHA, or 20% to avoid monthly mortgage insurance.
Important disclosures. LoanFitCalc is a free educational tool that provides estimates only. It is not a loan, a loan approval, a commitment to lend, a rate lock, or an offer to make a loan, and it does not provide financial, legal, or tax advice or recommend a specific loan for you. Mortgage insurance rates, funding and guarantee fees, loan limits, taxes, and insurance figures are typical published values used for estimation and are subject to change. Program eligibility rules are summarized and simplified. Actual terms depend on your full application, credit, property, and lender underwriting. Consult a licensed mortgage loan originator before making any decision. LoanFitCalc is an independent educational website and is not a lender. ⌂ Equal Housing Opportunity
