A mortgage is an ordinary loan from a large financial institution such as a Bank with the specific goal of buying a property. Such loan attracts interest either fixed or varying in rate. The property can be anything from a house to a piece of vacant land. The prospective buyer is referred to as the borrower and the financial institution as the lender. The institution will requisite a collateral from the borrower before loan application approval. Repayments consists of the principle amount plus interest. The lender will take the property in the form of repossession should borrower fail to repay mortgage.

The borrower can decide on either a fixed or variable interest rate. Interest payment can range from minimum six months to maximum 10 years and repayment of principle for maximum 35 years.

Pre-approval is of utmost importance for the buyer and seller of the property in question as it gives both parties assurance that the buyer qualified for the specified loan amount. Buyers will also have a better understanding of the price range that they will be able to invest in, thus time is not wasted on viewing property out of the their league.

They key to saving on your mortgage is to settle your loan as soon as you can. The interest payments are the greatest waste of money, especially if you have variable interest rate.

Financial institutions require insurance when mortgage is approved. The purpose of insurance is to ensure full settlement of the loan should specific events such as death, disability, loss of employment and critical illness occur.

Mortgage repayment consist out of more than just the principle amount and interest. Inspection, appraisal, legal, survey certificate fees as well as tax adjustments, insurances and moving costs may also apply. Your monthly budget should be stretched to accommodate all these possible costs.