Housing

A loan used to buy a home or other real estate, where the lender provides the money and the borrower repays it over a set period with interest. The home serves as collateral, so if payments stop, the lender can foreclose to recover the property. Most are repaid over 15, 20, or 30 years, with each monthly payment typically covering principal, interest, property taxes, and homeowners insurance (PITI).

The difference between the current market value of your home and the amount you still owe on your mortgage, representing the portion you truly own. For example, a $350,000 home with a $200,000 mortgage balance gives you $150,000 in equity. It grows two ways: by paying down the mortgage principal and through appreciation when your home’s value rises.

A revolving line of credit secured by your home that works much like a credit card, letting you borrow against your equity up to a set limit and withdraw funds as needed rather than in one lump sum. It has two phases: a draw period (often 5 to 10 years) with interest-only payments, followed by a repayment period covering principal and interest. Most carry variable interest rates, and because the loan is secured by your home, failure to repay can lead to foreclosure.

The initial amount you pay upfront when buying a home, expressed as a percentage of the purchase price and subtracted from the total you need to borrow. For example, a 20% down payment on a $300,000 home is $60,000, leaving $240,000 financed. A larger down payment lowers your loan-to-value ratio, which can secure better interest rates and help you avoid private mortgage insurance.

A percentage comparing how much of your gross monthly income goes toward monthly debt payments, calculated as total monthly debt divided by gross monthly income times 100. Lenders use it to judge how stretched your income already is when reviewing mortgages and other loans. It doesn’t appear on your credit report, and a lower ratio signals more room in your budget, making you a lower-risk borrower.

The percentage of a property’s value that you are borrowing, calculated by dividing the loan amount by the appraised value or purchase price (whichever is lower) and multiplying by 100. It measures risk for the lender, so a higher LTV is riskier and often means higher interest rates or a requirement to pay Private Mortgage Insurance. Keeping LTV at 80% or lower typically helps you avoid PMI and secure better loan terms.

 A home loan with an interest rate that stays the same for the entire loan term, so the rate you agree to at the start doesn’t change with market movements. Your principal and interest payment stays consistent month to month, which makes budgeting easier and protects you from rising rates. It is commonly offered in 15-, 20-, and 30-year terms, unlike an adjustable-rate mortgage whose rate can change after an initial period.