Looking for a simple mortgage definition? In layman's terms, the definition of a mortgage is money lent to you by a bank for the purpose of buying property. As long as you continue to pay the monthly bill, or what is called a mortgage, you can claim ownership to the property. A mortgage has can also be referred to as a lien or a trust deed.
The mortgage process is mostly painless. After you find a property you want to purchase, you will apply for a loan for the amount of the home. The bank will look into your credit history and if you pass their standards, they will give you the money with interest. So, a $50,000 home may end up costing $75,000 after the interest is tallied in. Most mortgage loans are based on thirty years amortization, which means you have thirty years to pay the money back. Some loans are shorter, like fifteen- or twenty-year loans, but those are less common.
A mortgage can come with a fixed interest rate or a six-month product. Fixed means whatever interest rate you signed the contract with will still be your interest rate 30 years from now, unless you refinance.
A six-month product interest rate changes on a daily basis. After the loan starts, the first six-month interest rate will be what you signed for on the contract. After that, the interest rate will fluctuate based on the current rate of a 30-year mortgage. You and your lender will come to an agreement on an interest rate cap, meaning if the interest rate goes above this number then it does not affect you. However, rates fluctuate daily, so this could mean a different mortgage payment every month.
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