A loan given by a bank, mortgage company or other financial institution for the purchase of a primary or investment residence. In a home mortgage, the owner of the property (the borrower) transfers the title to the lender on the condition that the title will be transferred back to the owner once the payment has been made and other terms of the mortgage have been met.
A home mortgage will have either a fixed or floating interest rate, which is paid monthly along with a contribution to the principal loan amount. As the homeowner pays down the principal over time, the interest is calculated on a smaller base so that future mortgage payments apply more towards principal reduction as opposed to just paying the interest charges.
Home loans consist of an adjustable or fixed interest rate and payment terms. A home loan can come in many flavors, the specifics of which will have a major impact on a large chunk of the buyers life. Choosing an adjustable or fixed rate, extending the loan for ten, fifteen, or even thirty years, and determining just how much money to invest in the down payment are all critical decisions.