A home loan (also called a mortgage) is money borrowed from a bank or financial institution to buy, build, or renovate a house, which you repay over time with interest.

🔑 How a Home Loan Works

1. You choose a property.

2. A lender (bank/financial institution) gives you most of the purchase money.

3. You pay a down payment (your contribution).

4. You repay the loan in monthly installments (EMIs) over an agreed period (e.g., 10–30 years).

5. The property itself is used as collateral. If you fail to repay, the lender can legally take and sell the property.

💰 Key Components

• Principal – The amount you borrow

• Interest – The cost of borrowing the money

• Loan Term – How long you’ll repay (e.g., 20 years)

• EMI (Equated Monthly Installment) – Your fixed monthly payment

• Down Payment – The upfront amount you pay (usually 10–30%)

🏠 Types of Home Loans

• Fixed-rate loan – Interest stays the same throughout the term

• Variable/Floating-rate loan – Interest can change over time

• Construction loan – For building a house

• Home equity loan – Borrowing against the value of your existing home

📌 Example

If a house costs $100,000:

• You pay $20,000 as down payment

• The bank lends you $80,000

• You repay the $80,000 plus interest over, say, 20 years