HOME LOANS

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A home loan is given by a bank or other financial institution for the purchase of a residence—either a primary residence, a secondary residence or an investment residence—in contrast to a piece of commercial or industrial property. In a home mortgage, the owner of the property (the borrower) transfers the title to the lender on the condition that the title will be transferred back to the owner once the final loan payment has been made and other terms of the mortgage have been met.

A home mortgage is one of the most common forms of debt, and it is also one of the most recommended. Because they are secured debt—there is an asset (the residence) acts as backing for the loan—mortgages come with lower interest rates than almost any other kind of loan an individual consumer can find.

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Key Takeaways

  • A home mortgage is a loan given by a bank, mortgage company or other financial institution for the purchase of a residence.
  • A home mortgage will have either a fixed or floating interest rate, and a lifespan of anywhere from three to 30 years.
  • The lender who extends the home mortgage retains the title to the property, which it gives to the borrower when the mortgage is paid off.