A mortgage is a loan secured by a property. The lender, typically a bank, agrees to lend the borrower money to buy a property. The borrower agrees to repay the loan, plus interest, over a specified period of time. The property serves as collateral for the loan, which means that if the borrower defaults on the loan, the lender can take possession of the property.
There are two main types of mortgages:
- Fixed-rate mortgage: The interest rate on a fixed-rate mortgage remains the same throughout the loan term. This type of mortgage is often chosen by borrowers who want to know exactly how much their monthly payments will be.
- Variable-rate mortgage: The interest rate on a variable-rate mortgage can change over time, based on an index such as the LIBOR (London Interbank Offered Rate). This type of mortgage can be more risky for borrowers, but it can also offer lower interest rates in the short term.
When you take out a mortgage, you will need to make a down payment. The down payment is the amount of money you will contribute towards the purchase of the property. The amount of the down payment will affect the size of your monthly payments and the length of the loan term.
You will also need to pay closing costs when you take out a mortgage. Closing costs are fees that are associated with the purchase of the property, such as appraisal fees, title insurance fees, and recording fees.
Mortgages can be a great way to finance the purchase of a property. However, it is important to understand the terms of the loan before you sign on the dotted line.
MCQs on Mortgage
- What is a mortgage?
- A loan secured by property.
- A loan that is not secured by property.
- A loan that is guaranteed by the government.
- A loan that is used to buy a car.
The answer is (a). A mortgage is a loan secured by property.
- What are the two main types of mortgages?
- Fixed-rate mortgage and variable-rate mortgage.
- Conventional mortgage and government-backed mortgage.
- FHA mortgage and VA mortgage.
- All of the above.
The answer is (d). The two main types of mortgages are fixed-rate mortgage and variable-rate mortgage.
- What is a down payment?
- The amount of money you will contribute towards the purchase of the property.
- The amount of money you will borrow from the lender.
- The amount of money you will pay in closing costs.
- The amount of money you will pay in interest.
The answer is (a). The down payment is the amount of money you will contribute towards the purchase of the property.
- What are closing costs?
- Fees that are associated with the purchase of the property.
- Fees that are associated with the mortgage loan.
- Fees that are associated with the down payment.
- Fees that are associated with the interest rate.
The answer is (a). Closing costs are fees that are associated with the purchase of the property.