Home Loan: Borrowing to Buy Property

A mortgage is a financial arrangement that enables individuals to purchase real estate, such as a home, even if they don’t have the full purchase amount upfront. It involves borrowing money from a bank or a lender to cover a significant portion of the property’s price. The property itself serves as collateral for the loan, which means that if the borrower fails to make the agreed-upon mortgage payments, the lender has the right to foreclose on the property, which involves taking ownership of it to recover the outstanding debt.

Mortgages typically come with specific terms, including an interest rate that determines the cost of borrowing the money. Borrowers make regular monthly payments that encompass both the loan’s principal (the initial amount borrowed) and the interest. Mortgages can have fixed interest rates, which remain constant throughout the loan term, or adjustable rates, which may change over time based on market conditions. The repayment period is often extended over several years, usually 15 to 30 years, allowing individuals to spread out the cost of homeownership while gradually building equity in the property.