A mortgage is loan for buying a specific thing, like a house. The item purchased is the collateral for the loan. That is, if the loan is not paid back, the lender can follow a process to take the house instead of monetary payback.

In the U.S., home mortgages are generally designed for 10, 15, 20 or 30 years. The initial payments are primarily applied to the interest that will be owed rather than the principle, or amount borrowed. Some people argue that since most people no longer live in the same place that long, that mortgages should generally be for the shorter terms.


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