In personal finance, a loan secured by real estate, usually a home, is called a mortgage.
The property serves as collateral for the debt. If the borrower fails to meet the loan obligations, the lender may have legal rights to enforce the security, potentially through foreclosure procedures. The exact process depends on local law and the mortgage contract.
A mortgage payment may include principal and interest, and it may also include amounts collected for property taxes or homeowners insurance. These components should not be confused with the interest rate or the loan’s total cost.
Mortgages can have fixed or adjustable interest rates and may be repaid over different terms. A down payment reduces the amount borrowed but does not itself constitute the mortgage.