Mortgage loans are the primary tool homebuyers use to pay for their home. Mortgage loans can also be used to buy some investment properties and vacation homes, although they’re most commonly known for their use in financing a primary residence.
Homebuyers will pay a down payment on the home, and the remainder of the financing will come from the mortgage. As a rule of thumb, a mortgage will pay for 80% of the price of the home, although there are specialized programs that can allow a mortgage to pay for a higher percentage of the purchase. Some programs will even provide for 100% financing. Mortgages for investment properties and second homes will generally require a larger down payment.
After the home is purchased, the homeowner makes monthly payments of both principal and interest to pay off the loan over time. Most mortgage loans in the are repaid over a 30-year period.
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