FAQs about Mortgages

A mortgage is a type of loan used to purchase real estate, where the property itself serves as collateral. The borrower makes regular payments (monthly, in most cases) that cover both the principal amount and the interest charged by the lender.

When you take out a mortgage, the lender provides funds to help you buy a home. You agree to repay this loan, typically over 15, 20, or 30 years, with interest. If you fail to make payments, the lender has the legal right to foreclose, meaning they can take ownership of the property.

• Fixed-rate mortgage – The interest rate remains the same for the entire loan term.
• Adjustable-rate mortgage (ARM) – The interest rate changes periodically, often after an initial fixed period.
• Interest-only mortgage – Borrowers pay only interest for a set time before paying both principal and interest.
• Government-backed mortgages – Loans supported by government agencies (such as FHA, VA, or USDA in the U.S.) with special terms.
• Offset mortgages – More common in countries like the UK and Australia, these allow borrowers to link savings accounts to reduce interest costs.

The amount varies by country and lender. In the U.S., it can be as low as 3–5% with certain loans, though 20% is often considered ideal. In other countries like Canada, the UK, or India, the down payment typically ranges between 10% and 25% of the property’s value.

Key factors include:

• Credit score or credit history
• Income stability and employment record
• Debt-to-income ratio
• Size of the down payment
• Property value and location

• Principal – The amount you borrow.
• Interest – The cost of borrowing, expressed as a percentage of the loan amount.

Your monthly mortgage payment usually covers both, plus taxes and insurance in some regions.

Yes, but rules vary. Some lenders allow early repayments without penalties, while others charge “prepayment penalties.” It’s important to review the loan terms before making extra payments.

Refinancing means replacing your current mortgage with a new one, usually to get a lower interest rate, change the loan term, or switch from an adjustable-rate to a fixed-rate mortgage.

Closing costs are fees paid at the end of a real estate transaction. They may include appraisal fees, legal fees, taxes, title insurance, and loan origination charges. These typically range from 2% to 5% of the loan amount.

Mortgage rates vary significantly across countries. For example, the U.S. and Canada often use fixed or adjustable rates, while European nations like Germany and France favor long-term fixed loans. Emerging economies may have higher interest rates due to inflation and lending risks. Always compare local market conditions before choosing a mortgage.

If you miss multiple payments, the lender can initiate foreclosure proceedings and take possession of the property. In some countries, you may still owe money even after foreclosure if the property sells for less than the loan balance.

Consider your income stability, long-term plans, and risk tolerance. Fixed-rate mortgages are safer for those wanting predictability, while adjustable mortgages may suit borrowers expecting income growth or short-term ownership. Consulting with financial advisors or trusted mortgage brokers can also provide valuable guidance.