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A mortgage is a contract between a lender and a borrower where the borrower receives money to pay for a house. The borrower does not need to pay this debt back all at one time; instead, the borrower makes monthly payments to the lender, usually for a period of 30 years. Along with paying back the money borrowed, the borrower must also pay interest on the loan.
If a mortgage cannot be repaid to the lender, the institution from which the loan has been borrowed has the option to sell the borrower's home in order to gain its money back. This is allowed to occur because the borrower has pledged that his or her house can be used as security in case the loan cannot be repaid.
Often, people who have taken out a mortgage on a house decide to refinance later down the road. When this occurs, the borrower replaces his or her current home loan with a new loan, usually for a lower interest rate. By doing this, the borrower makes smaller monthly payments.
When deciding to procure a mortgage, it may be a good idea to "shop around," checking out the interest rates that various mortgage companies are offering. Doing so could save the borrower thousands of dollars over the life of the loan.
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