Mortgages: What Are They?
A mortgage is a loan that helps you buy a house. It's also a promise to the bank that you'll pay back all the money they lent you for the house without skipping town and becoming a pro surfer in Hawaii.
The term comes from the Latin "mort," which means death.
The notion of a mortgage meant that you would pay it until it died (after, say, 30 years), or until you did.
Why Do I Need One?
While mortgages are huge loans and cost lots of money in interest, they're usually the only way you can afford to buy a home—unless you have a rich Daddy, a trust fund, or a mob connection. If you don't have hundreds of thousands of dollars in your bank account, you'll probably need a mortgage—and tens of thousands of dollars in a down payment—to afford a house.
What If They're Not For Me?
Yes, you can avoid mortgages entirely if the whole mort-means-death thing scares you, but without mortgages your only options are as follows:
- Live with mom and dad or couch surf for the rest of your life
- Hope some long-lost relative leaves you a house in their will
- Save up the money until you can afford to buy a house with cash at age eighty-nine
Mortgages do have a few advantages (besides the fact that they help you avoid sleeping on your buddy's chip-smelling sofa for the rest of your days):
- You get a tax break on your payments if you have one.
- If you pay your mortgage on time, it can make you a better credit risk if you ever decide to borrow money again (and you will).
- Paying off your mortgage feels so amazing you'll probably throw a cool party.
- When you have a mortgage, you're building equity in your own house, rather than paying rent to a landlord and helping them get rich.
Mortgages might not be as fun as, say, an all-expenses-paid trip to Bora Bora, but they're also probably not as bad as your Monday morning Calculus class, either. Even if you're not born rich, these loans help you afford a better lifestyle than you can get most other ways.