UPDATED: October 24, 2013
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A mortgage is a loan that is secured by a house or other real estate property. This debt instrument allows you to make loan payments in installments over a repayment term such as 15, 20, or 30 years. Your property is used as collateral for the loan. So, if you fail to fully repay the mortgage, the lender can take the property and sell it to pay off the loan.
A fixed-rate mortgage comes with an interest rate that does not change during the life of the loan. A fixed-rate mortgage is also known as a "traditional mortgage". With an adjustable-rate mortgage or variable mortgage, interest rates and therefore installment payments will fluctuate over the life of the loan. A balloon mortgage allows you to make monthly payments as though you have a 30-year repayment term, but the entire loan balance will be due at the end of the term, such as in 5 or 7 years.
Research your Mortgage
It is important to explore your options before taking out a mortgage. In addition to deciding which repayment term and type of mortgage will work best for your situation, you will learn that multiple lenders often charge different fees and interest rates for the same types of loans. Carefully make your decision, since taking on a mortgage may be your largest legally-binding financial obligation.