ELI5: mortgage

// eli5

What is a mortgage?

A mortgage is like borrowing money from a bank to buy a house, but the bank gets to keep the house as a promise that you'll pay them back [2]. It's similar to if your parents lent you money for a toy but kept the toy until you paid them back every penny [2].

Why do people get mortgages?

Most people don't have enough money saved up to buy a house all at once, so they borrow from a bank and pay it back slowly over many years [2]. The bank charges you extra money called interest for letting you borrow [4].

What happens if you don't pay back?

If you stop paying the bank, they can take your house away because that's the deal you made when you got the mortgage [2]. This protects the bank in case you can't pay them back.

How much do you pay each month?

Your monthly payment depends on how much money you borrowed, the interest rate the bank charges, and how many years you have to pay it back [1][3]. You can use a mortgage calculator to figure out exactly how much you'd pay each month [1][3].