A mortgage is typically the largest debt most households take on. Common structures are fixed-rate (payment locked for the life of the loan) and adjustable-rate (payment resets after an initial period).
Total cost depends on price, down payment, rate, term, taxes, insurance, and any private mortgage insurance. Small rate differences compound into large lifetime differences on a 30-year loan.
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How much house can I afford?
A common rule: total housing cost (mortgage, taxes, insurance) under 28% of gross income, and total debt under 36%. Personal comfort should be more conservative than the maximum a lender will approve.
Related terms
Debt-to-income (DTI) ratio
The percentage of gross monthly income spent servicing debt.
APR (annual percentage rate)
The yearly cost of borrowing, including interest and most fees, expressed as a percentage.
Amortization
The process of paying off a loan through scheduled principal and interest payments over time.
Amortisation
Spreading loan payments over time so principal and interest are gradually paid off.
Escrow
Funds held by a third party pending completion of a transaction.
Refinancing
Replacing an existing loan with a new one, usually at a lower rate or better terms.