As dull and boring as they sound, mortgages are an essential part of life. Without mortgages, the majority of the population would be homeless.

They are the only way for many of us to purchase houses, and most people will deal with one at some point. Certainly, if you intend to buy a home, you will need to get a mortgage. 

With that in mind, it helps to know as much about them as possible. So, here are the main things to be aware of:

Repaying your mortgage

Obviously, you all know that mortgages are loans that need to be repaid. How is this done? Well, you're given an interest rate on your mortgage, and an annual percentage rate is calculated from this.

Effectively, this helps you work out how much interest you will pay per year for the duration of your loan. On top of this, you also have monthly payments to pay the mortgage itself. You could also have annual fees, though this depends on the lender. 

In essence, repayments follow a very straightforward structure. Your lender works out how much you need to pay each month, and you set up a direct debit to pay them on time.

There are also things called interest-only mortgages, whereby you pay the interest off over the loan term, then you pay the actual mortgage amount in one go at the end. It's a strange concept and one that's rare in modern society. 

Mortgage loan interest rates

All mortgages come with interest rates, and there are two main variants you can choose from. The most popular is a variable home loan, which gives you an interest rate that fluctuates throughout the term. It could go up, but it could also go down. 

The second option is a fixed mortgage rate, giving you an interest rate that stays the same for a period. When the period is up, it will fluctuate. Most of the time, variable interest rates are cheaper over the course of the loan.

Don't take this as the law - it can vary depending on your mortgage! One advantage of variable rates is that you can usually make overpayments or switch to a different mortgage without incurring any fees or penalties. Fixed-rate mortgages tend to be stricter. 

Failing to repay your mortgage

If you start falling behind on mortgage payments, you will likely get hit with penalties on top of what you owe. This will make your mortgage more expensive, but what happens if you fail to pay the entire loan? Your lender can take court action against you, possibly claiming control of your home.

After all, they financed it, and if you haven't repaid them, they could take your home and sell it to claim their money. Thankfully, there are many solutions and sources of advice out there to make it hard for you to fail to pay your mortgage.

This is a good place to end things to give you a starting point on mortgages. Those of you that are buying your first home should do as much research into loans as possible. Learn more about them, and you will be able to find the best option for your needs.