A mortgage is a type of loan to buy a property, secured by that property. If you don’t repay your loan on time, it allows the lender to take possession. In other words, if you get a mortgage to buy your home, it is your home that acts as the loan collateral. Most people don’t have enough money to buy a house outright. A house also costs a lot of money, which means you can’t pay for it using a credit card or line of credit. A mortgage is typically a large loan, which requires borrowers to pay back a set amount on a monthly basis over a number of years.
How much mortgage can I afford? A good rule of thumb is that your monthly housing costs should be no more than 39% of your gross household income (the amount earned before subtracting taxes or other deductions).