Learn the basics of a mortgage loan for buying a home, types of mortgage lenders, and types of mortgages. An introduction to mortgages.
Use this video lesson on the topic to discuss the terminology and basic economic and related concepts of
- Purchasing a Home
- Home Loans
- Interest Rates
- Budgeting and Monthly Expenses
Hand out the worksheet below (see the GET LESSON button near the bottom of the page).
Show students the video and have and have them complete the worksheet. Then have a discussion about mortgages and how they are used to purchase a home. Review the questions on the worksheet.
What is a Mortgage?
A mortgage, also called a home loan, is a type of loan used to buy a house or other types of real estate. Banks, credit unions and other financial institutions all offer mortgages.
If you are looking to buy a home, but don’t have enough money to pay it off in full, you may ask a lender for a mortgage for the purchase. You can purchase the home with this loan provided that you pay your monthly mortgage payments to the lender until the loan is fully paid off.
A mortgage loan is a secured loan that can be used to purchase a property. You must pledge the property as collateral to secure the loan. If you default on the loan repayments, your lender can take possession of the property. Once the loan has been fully repaid, however, the property is yours and your lender can no longer take it away.
When you apply for a mortgage to buy a home, and your application is accepted, your lender pays for the entire property. Later, you pay the lender back along with interest payments. Borrowers usually make one payment per month for the duration of the loan.
There are many types of mortgages. Fixed-rate mortgages are generally the most popular type of mortgage. You can choose to have the interest rate remain the same or change over time. They may also have different eligibility criteria. These variations are largely due to your repayment terms and the risk taken by the lender. You can choose to have a shorter or longer repayment term for a mortgage.
With a shorter-term loan will pay your mortgage off faster, and you’ll pay less cumulative interest over the loan’s life. However, this can lead to higher monthly payments. While a longer-term loan will have a lower monthly payment and a higher interest rate, borrowers with longer terms will pay more over the life of the loan.
The best type of mortgage for you will depend on your financial situation and how long you intend to live in the house that you are purchasing. Mortgages are an important part of the home buying process for many people for purchasing a home.