A mortgage is a loan you use to buy a property. It’s a legal agreement between you and a lender, usually a bank or building society.
The word ‘mortgage’ means both the loan itself, and the contract between you and your lender.
In the simplest terms, you’re promising the lender that over time, you’ll pay back your loan. Before you sign the contract, you and your lender will agree terms and conditions like the:
• mortgage term: how long you’ll take to repay the loan
• rate: how much interest the lender will charge you for the loan over this term
• way you’ll repay: repayment or interest only
A mortgage is a ‘secured loan’ because the lender uses your home as a ‘security’ during your loan – a kind of collateral. Which means if you stop paying back your loan, your lender could make you sell your home and use the money to pay them back.
You can usually borrow only up to around 90% of a property’s value. That means you’ll need a deposit of 10% to buy your property.
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