Understanding Mortgage Basics
A mortgage is a loan secured against a property. The lender holds a legal claim on the property until the loan is repaid. Most mortgages are structured as amortising loans — meaning each payment covers both interest and a portion of the principal balance.
Fixed vs Adjustable Rate
A fixed-rate mortgage has the same interest rate for the entire term. Monthly payments are predictable. An adjustable-rate mortgage (ARM) starts with a lower rate that can change after an initial period. ARMs carry interest rate risk but may be appropriate for buyers who plan to move within the fixed period.
How to Calculate Monthly Payments
Monthly payment = P × [r(1+r)^n] / [(1+r)^n - 1], where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of months. Use our Mortgage Calculator to try different scenarios instantly.
The True Cost of a Mortgage
On a $300,000 mortgage at 6.5% over 30 years, you will pay approximately $382,000 in total interest — more than the original loan amount. Paying even slightly more each month dramatically reduces the total interest paid.
Tips for Getting the Best Rate
Improve your credit score before applying. A difference of 0.5% in interest rate on a 30-year mortgage saves tens of thousands of dollars over the loan term. Compare offers from multiple lenders and negotiate.
