Mortgage

What It Means

A mortgage is a loan for buying a home, or for refinancingRefinancingReplacing a loan you already have with a new one, usually to get a lower rate, a different term or a different payment. See more one you already own, in which the home itself secures the debt. If the payments stop, the lender can take the property through foreclosure. You repay it in monthly installments over a term, most often 15, 20 or 30 years. The Consumer Financial Protection Bureau (CFPB) splits the usual payment into four parts, known as PITI: principal, interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more, taxes and insurance.

How People Say It

• "Our mortgage went up and the rate never changed."
• "We've got twenty-two years left on the house."
• "Are taxes and insurance in that number or on top of it?"

The Breakdown

Worked example. A $320,000 loan over 30 years at an example fixed rateFixed interest rateAn interest rate that's set when you borrow and stays the same for the life of the loan, so the monthly payment doesn't change. See more of 6.5%, on a home with a $4,200 yearly property taxProperty taxA yearly tax your local government charges on real estate you own, worked out from the property's assessed value and the local tax rate. See more bill and $1,800 a year of homeowners insurance:

What the result means. Ads and rate quotes usually show only the principal and interest line. The CFPB warns that buyers who plan around that figure are often surprised by the real total, which here is $500 a month higher. Kept for all 30 years, this loan charges about $408,142 in interest, more than the amount borrowed, because early payments go mostly to interest (the amortizationAmortizationPaying off a loan through regular scheduled payments, each split between interest and principal, until the balance reaches zero at the end of the term. See more page shows the month-by-month split). A 15-year term raises the payment and cuts that interest sharply; try it in the tool.

Loan size limits. The Federal Housing Finance Agency (FHFA) sets the largest loan Fannie Mae and Freddie Mac can buy, called the conforming loan limit. For 2026 it is $832,750 for a one-unit home in most of the country, with a ceiling of $1,249,125 in high-cost areas.

Good to Know

Because the taxes and insurance parts of the payment follow your property tax bill and your insurance premiumInsurance premiumThe amount you pay to keep an insurance plan, such as health insurance, in force, usually monthly, quarterly or yearly, whether or not you use any care. See more, a fixed-rate mortgage payment can still rise from one year to the next. The CFPB explains that those amounts often go into an escrow accountEscrowOn a mortgage, an account your servicer keeps to pay your property taxes and homeowners insurance, funded by part of each monthly payment. See more, which your servicer uses to pay the bills as they come due. Your home secures the loan, and the CFPB points out that falling behind can lead to foreclosure. Before you choose a lender, compare the total monthly payment and the interest over the life of each offer, not only the rate.

Related Terms and Categories

• Down payment

  The share of a home's price you pay upfront in cash when you buy it; the mortgage covers the rest.

• Private mortgage insurance

  Insurance that protects a mortgage lender if the borrower stops paying, often required on a conventional loan with less than 20% down.

• Escrow

  On a mortgage, an account your servicer keeps to pay your property taxes and homeowners insurance, funded by part of each monthly payment.

• Amortization

  Paying off a loan through regular scheduled payments, each split between interest and principal, until the balance reaches zero at the end of the term.

• Loan term

  How long you have to repay a loan, usually stated in months for a car loan and in years for a mortgage.

• Closing costs

  The fees and upfront charges you pay to finalize a mortgage, apart from the down payment, itemized on your Loan Estimate and Closing Disclosure.

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