Understanding Mortgages: What First-Time Homebuyers Should Know

Buying a home is one of the biggest financial decisions most people will ever make, and the mortgage you choose plays a major role in how affordable that decision is long-term. Mortgages can feel complicated at first, but once you understand the basics, it becomes much easier to compare options, avoid costly mistakes, and choose a loan that fits your financial situation.

What a Mortgage Actually Is

A mortgage is a loan used to buy property. You borrow money from a lender and repay it over time, usually over 20 to 30 years, with interest. The home itself acts as security for the loan, which is why lenders can offer lower interest rates compared to other types of borrowing.

The Main Parts of a Mortgage

Every mortgage has four key elements:

• Principal: the amount you borrow

• Interest: the cost of borrowing the money

• Term: how long you take to repay the loan

• Monthly payment: the amount you pay each month
  Understanding these components helps you see how changes in interest rates or loan length affect your total cost.

Fixed vs. Variable Rate Mortgages

One of the first choices you’ll make is between a fixed-rate and a variable-rate mortgage.
A fixed-rate mortgage keeps the same interest rate for the entire term. Your monthly payments stay predictable, which makes budgeting easier.
A variable-rate mortgage changes with the market. Your payments may go up or down over time. These loans can start cheaper but come with more uncertainty.
First-time buyers often prefer fixed rates for stability.