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?!How to Adult

Lesson

What a mortgage is

Published:
October 12, 2026
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AThe super simple explanation

A is a loan used to buy a home.

You pay it back in monthly payments, often over 15 or 30 years.

The home secures the loan, which means the lender can take it if you stop paying.

BWhy does this even matter?

  • It's likely the biggest debt you'll ever take on.
  • Small differences in interest rate add up to large amounts over decades.
  • Understanding the payment helps you know what you can actually afford.

COkay, how does it work?

A lender reviews your income, debts, and credit and estimates how much it may lend.

Try it

Mortgage payment calculator

Amount borrowed (principal)
$270,000
Principal + interest / month
$1,706.58
With taxes & insurance
$2,106.58
Total interest over the loan
$344,370

Assumptions: fixed rate, the same payment every month, no PMI, HOA fees, or rate changes. Taxes & insurance are your own estimate. Example rate shown is illustrative, not a current market rate.

DShow me an example

Price vs. loan (illustrative)

A home costs $300,000. The buyer puts down $30,000 (10%).

The mortgage is $270,000, plus interest over the loan term.

Illustrative example with made-up people and numbers — not current rates or rules.

EWords you should know

Principal
The original amount borrowed (or the part still owed), not counting interest.
Interest
The price of using someone else's money — you pay it when you borrow and earn it when you save.
Amortization
Paying off a loan in regular scheduled payments, where each payment covers some interest and some of the loan itself.
Foreclosure
The legal process a lender can use to take a home when payments stop.
More in “Words everyone pretends to know” →

FCommon mistakes

  • Only looking at the monthly payment and ignoring total cost.
  • Forgetting taxes, insurance, HOA fees, and maintenance when budgeting.
  • Not comparing offers from more than one lender.

GQuestions people are too embarrassed to ask

HQuiz me

Totally optional. Nobody's grading you.

Question 1

Q1. What does a mortgage use as security?

Question 2

Q2. In PITI, what does the T stand for?

Question 3

Q3. Early in a loan, most of each payment goes to…

IWhat next?

  1. 1.Read CFPB's homebuying tools.
  2. 2.Learn about escrow.

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JTrustworthy resources