Mortgage loan

A mortgage loan is borrowing secured by real estate. The lender can foreclose on the property if the borrower fails to repay as agreed.

Amortization: Repayment of a debt through scheduled payments that cover interest and reduce principal over time. A mortgage payment gradually repays principal while covering interest.
Principal (finance): The amount of money borrowed or still owed, excluding interest and other charges. Mortgage principal is the balance that scheduled payments gradually reduce.
Fixed-rate mortgage: A mortgage whose interest rate remains unchanged for the agreed loan term. Its stable rate contrasts with mortgages whose rates can change.
Home equity: The portion of a property’s value that remains after subtracting debts secured by it. Mortgage repayment and changes in home value alter the owner’s equity.
Loan-to-value ratio: The loan amount expressed as a proportion of the value of the asset securing it. Lenders use this ratio to assess the property’s collateral relative to the mortgage balance.
Interest rate: The cost of borrowing expressed as a proportion of the amount borrowed over a period of time. The mortgage rate determines how much interest accrues on the outstanding balance.
Adjustable-rate mortgage: A mortgage whose interest rate can change according to specified benchmarks and adjustment rules. Its changing rate can make payments less predictable than fixed-rate financing.
Cash-out refinancing: Replacing a mortgage with a larger loan and receiving the difference as cash. Homeowners can borrow against accumulated equity by refinancing.
Mortgage underwriting: The lender’s assessment of a borrower’s finances, property, and repayment risk before approving a mortgage. Underwriting determines whether the borrower and property qualify for the requested loan.
Collateral (finance): An asset pledged to secure repayment of a loan. Real estate serves as the collateral that distinguishes a mortgage loan from unsecured borrowing.

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