The basic mortgage meaning is a loan used to buy a house, flat or land, where the property acts as security: if the borrower stops paying, the lender has the right to take the property and sell it to get its money back. Most people repay a mortgage in monthly installments over many years, often 15 to 30.
Strictly speaking, the mortgage is the legal claim on the property, and the loan is the debt it secures, but in everyday speech the two are treated as one. Below you will find a fuller mortgage definition, the key terms, a worked example and the story behind its strange spelling.
Entry at a glance
Meaning
A property loan secured by the property itselfPart of speech
Noun (a mortgage); verb (to mortgage a house)Pronunciation
MOR-gij; the t is silentPeople
mortgagor (borrower), mortgagee (lender)Origin
Old French mort gage, "dead pledge"; in English from the late 14th centuryClose words
home loan, lien, collateralRegister
Neutral; banking, law and everyday talk
Mortgage meaning for a first time buyer
Few people can pay for a home in cash, so they borrow. A mortgage makes that possible. To define mortgage simply: you get money now, the lender gets a legal claim on the home, and you pay back the money plus interest over time. When the last payment is made, the claim ends and you own the home free and clear.
The idea of a claim on property that protects a lender also appears in the words lien and collateral. A mortgage is the most common kind of secured loan most families ever take.
How a mortgage works: a worked example
Say you borrow $200,000 at a fixed interest rate of 6% a year, to be repaid over 30 years.
- Monthly payment: about $1,199.
- First month: about $1,000 of that is interest and only about $199 reduces the debt.
- Over time: as the balance falls, less goes to interest and more to the debt.
- Total paid over 30 years: about $431,700, of which about $231,700 is interest.
Choose a 15 year term instead and the payment rises to about $1,688 a month, but total interest falls to about $103,800. In India the same idea is called a home loan, and the monthly installment is an EMI. A loan of Rs 30 lakh at 8.5% for 20 years works out to an EMI of about Rs 26,000.
Key mortgage terms
| Term | Plain meaning |
|---|---|
| Principal | The amount borrowed, not counting interest (see principal) |
| Down payment | The part of the price you pay upfront from your own money |
| Fixed rate | Interest rate stays the same for the whole term |
| Adjustable or floating rate | Interest rate can rise or fall with the market |
| Term | How many years you have to repay |
| Escrow | In the US, an account that holds money for property tax and insurance |
| Refinance | Replace your mortgage with a new one, often at a better rate |
| Foreclosure | The lender takes and sells the home after missed payments |
Why is there a silent t? The origin
The word comes from Old French mort gage, which means "dead pledge". The word reached English around the late 1300s. The usual explanation is that the pledge "dies" in one of two ways: when the debt is paid, the claim dies; if the debt is not paid, the property is lost to the borrower. The t was put back into the spelling later to match the Latin word for dead, mortuus, but it was never brought back into speech. So say MOR-gij.
Mortgage as a verb and in idioms
As a verb, to mortgage something means to pledge it as security for a loan: they mortgaged the shop to fund the expansion. Figuratively, mortgage the future means giving up later benefits for something now, as in borrowing heavily to fund a party would mortgage the club's future.
Other common forms: mortgage payment, mortgage rate, pay off the mortgage, take out a mortgage, and second mortgage, a further loan on a home that already has one. Being mortgage-free means the debt is fully paid.
Mortgage in example sentences
- They finally paid off the mortgage two years before retirement.
- Our bank offered a lower mortgage rate if we set up automatic payments.
- Before signing, she asked a friend in banking to explain the mortgage papers line by line.
- He took out a second mortgage to pay for his daughter's college fees.
- Higher interest rates have made mortgages harder to afford for first time buyers.
A couple buys a flat and moves in, but the bank holds a legal charge on it until the loan is cleared. They live there and call it theirs, yet the mortgage means the bank's claim comes first if they cannot pay. That shared, temporary stake is the heart of the word.
For loans, interest and other money vocabulary, browse the business and finance terms list.
Frequently asked questions
What is a mortgage in simple words?
A mortgage is a loan to buy property. The property is used as a guarantee, so the lender can take it if you stop paying. You usually repay it monthly over many years.
Is a mortgage the same as a home loan?
In everyday use, yes. Technically the mortgage is the lender's legal claim on the home, and the home loan is the debt. In India people mostly say home loan, while in the US and UK they say mortgage.
Who is the mortgagor and who is the mortgagee?
The mortgagor is the borrower, who gives the claim on the property. The mortgagee is the lender, who receives it. Many people mix these up because the borrower sounds like the receiver.
Why is the t in mortgage silent?
The word entered English from Old French without a clear t sound. The letter was later added to match Latin, but pronunciation did not change.
What happens if you cannot pay a mortgage?
Missed payments bring late fees and damage your credit. If they continue, the lender can start foreclosure and sell the property. Most lenders prefer to discuss a new payment plan first.
Can you mortgage something other than a house?
Yes. Land, shops, offices and other property can be mortgaged. In a wider sense, any asset pledged against a loan can be said to be mortgaged.