Ignite FB Tracking PixelWhat is the mortgage, anyway? - John Wann

What is the mortgage, anyway?

by John Wann 09/19/2022

For many, the concept of buying property seems completely unfamiliar - and paying for it might make you wonder, “what is ‘the mortgage,’ anyway?” If you’ve rented a house or apartment before, you’re familiar with monthly payments and extra fees for maintaining the property. But how is a mortgage different?

To help you gain a better understanding of what a mortgage actually is and how it works, here is a quick guide to the basics:

Mortgage basics

You can think of mortgages similar to car loans. You pay monthly repayments with fixed interest until you pay off the loan. 

Mortgage loans work because only few buyers have the money they need up front to make this kind of huge purchase. Instead of paying out-of-pocket, a mortgage helps you spread your purchase costs over several years, allowing you to buy homes at lower costs.

How are mortgages different from other loans?

Mortgage loans have interest rates and agreed upon repayment periods like any other loan. However, some important distinctions distinguish mortgage loans from other types of loans. 

A mortgage is a secured loan, which means it requires collateral - an asset the lender can seize if you default on the loan. In the case of mortgages, the property itself is collateral. 

An unsecured loan doesn’t require collateral, but may have higher interest rates or minimum qualifications to help the lender mitigate risk.

What goes into a mortgage payment?

You pay your mortgage payment monthly. Mortgage loans comprise four major costs: principal, interest, taxes and insurance. Principal is the actual amount of money you borrow, and interest is the percentage that goes back to the lender.  

Property taxes and insurance also factor into your monthly payment. Insurance could be either mortgage insurance or homeowners insurance, depending on which type you have.

Do I own my home when I have a mortgage?

Buying a home means you’re responsible for making decisions about the property, but a mortgage can make the concept of ownership confusing. However, the simple answer is yes, you do own your home as long as the terms of the mortgage are met.

Even knowing the basics about a mortgage loan, the process can seem daunting. However, this key information will help guide you through the process of becoming a homeowner.

About the Author
Author

John Wann

My name is John Wann. And I have never sold anyone a home. 

What I have done is introduce people to houses, a community and one of the most beautiful areas of the country that I think they will love.

Frankly, there is a lot to love in this mountain area west of Denver. 

Yes, I am in sales. Of course. I have been in professional sales for more than 30 years and, more importantly, I have lived in the Evergreen area for more than 27 years. 

In short, I know the territory. 

I moved here from Atlanta, Georgia and never looked back. Every drive back “up the hill” from Denver feels like I am about to go on vacation. Again. That’s not a feeling you can get in many places in this world.

To be sure, I have intimate knowledge of the real estate here. But more, I know this community. 

If you're looking for a great restaurant with a cozy, mountain atmosphere. Just ask me. If you're looking for something less sedate, well, I know those places too. And I also know a lot of great hiking trails.

I am a member of the Institute for Luxury Home Marketing and a Certified Mountain Area Specialist. If you're coming from another part of the country that may not mean much to you, but I can help you avoid the pitfalls and understand the quirks of buying a home in the mountains. 

For people who are new to the area, this can ensure that you can find real happiness in a home here.

Simply, buying a house in the mountains is not the same as buying a house in Kansas City or Chicago.

For example, it makes little difference if you buy a south-facing house in Texas. But in the mountains, it can make all the difference between whether you get to your garage in winter or not.

Paying attention to such things and 100 others can ensure that you love your mountain home. Love your new community. And love the joys of mountain living. 

For me, it’s a privilege to pass along such insights.