Finance
How do mortgages work?
A mortgage is a long-term loan used to buy a home, with the property itself as security. You repay it in monthly installments of principal plus interest over many years, and the lender can claim the home if you stop paying.
See it in motion.
Watch a 2-minute animated lesson that shows exactly how mortgages works.
Step by step
- 1It's a loan to buy property, secured against that property.
- 2You repay monthly over a long term, often 15–30 years.
- 3Each payment covers interest plus a slice of the principal.
- 4If payments stop, the lender can repossess the home.
Frequently asked questions
- How does a mortgage work?
- You borrow money to buy a home and repay it monthly, with interest, over many years; the home secures the loan.
- What is a down payment?
- An upfront share of the home's price you pay yourself; the mortgage covers the rest.
- What's the difference between fixed and variable rates?
- A fixed rate stays the same for a set period; a variable rate can rise or fall with the market.