What is a mortgage?

A mortgage is a lien on real estate that pledges the property to a lender as security against a debt. The mortgage is not a debt itself, but is security for the debt in that the lender can take legal possession of the property if the debt is not paid.

The most common form of mortgage is against a loan raised to purchase a property, with the property itself being the security for the loan. They are extremely popular forms of financial product because a house is normally the highest value item owned by a borrower, and can therefore enable a significant loan to be granted.

That is a mortgage in general legal terms, but in common terms a mortgage is considered to be a loan raised to purchased a house, with the house itself being security for the loan. A second mortgage is a further loan raised for any purpose, such as home improvements, with the equity of the house used as security.

Because a mortgage is likely to be the largest and most important financial commitment any of us will be involved in, it is important that you make sure that you are getting the best advice possible before signing the dotted line. You should make sure that you get the best deal you can: the best interest rate and repayment terms possible.

There are a number of ways in which you can arrange a mortgage, and also a number of alternative sources. For example, you can get the finance directly from a building society or a bank - there is not a lot between them these days - or take the advice of a mortgage broker who has access to a number of different lenders. Irrespective of whom you deal with, make sure that they are licensed to provide advice on mortgages and to sell them, and also that they come under the auspices of the Financial Regulator.