Definition: The term "mortgage" is a legal obligation that obliges an individual or entity to pay back money over time to a lender for use in property investment. The most common form of mortgage is the fixed-rate mortgage, which means that the borrower agrees to pay a set amount every month for a certain period of time. The interest rate on this type of mortgage can vary from one year to 20 years or longer, depending on factors such as credit score and location. Some examples of mortgages include: - A single-family home loan: This is a fixed-rate mortgage that allows the borrower to buy a house without having to make any monthly payments for 15 or more years. - An adjustable-rate mortgage (ARM): An ARM is a type of fixed-rate mortgage that can change its interest rate at any time during the term of the mortgage. The borrower must agree to this and pay back the difference between the current and new rates each month. - A reverse mortgage: A reverse mortgage allows a homeowner who has already died or retired to access their home equity without having to sell it, so that they can use it to increase their income or purchase a second home. Understanding mortgages is essential for anyone considering buying or refinancing a property. It's important to be aware of the different types of mortgages and how they work with the purpose and terms of each mortgage.
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