A loan used to purchase real estate, secured by the property itself.
A mortgage is a loan specifically designed to purchase real estate (land and buildings). The property serves as collateral; if you default, the lender can foreclose and sell the property to recover the loan. Mortgages typically have long terms (15, 20, 30 years) and lower interest rates than unsecured loans because the collateral reduces lender risk. A mortgage involves a down payment (typically 5–20% of purchase price) and financed amount. Each monthly payment includes principal (reducing the loan balance) and interest (lender's cost). Mortgages are amortizing loans where payments are structured to fully repay the loan by maturity. Interest paid in early years is much higher than principal; over time, the opposite becomes true. Understanding mortgage terms, rates, and payment calculations is essential for the largest financial commitment most people make.