Understanding Mortgage Basics

What Is a Mortgage?

A mortgage is a loan you take from a bank or lender to buy a home.

• You pay a down payment upfront

• The bank covers the rest

• You repay the loan monthly over time (e.g., 10–30 years)

👉 The house itself is used as collateral (security for the loan)

💰 Key Mortgage Terms You Should Know

📊 Loan Amount

• Total amount you borrow from the bank

• Example:

  • House = ₱2,000,000

  • Down payment = ₱400,000

  • Loan = ₱1,600,000

📈 Interest Rate

• The cost of borrowing money

• Can be:

  • Fixed (stays the same)

  • Variable (can change over time)

👉 Even a small % difference = big impact long-term

📅 Loan Term

• How long you’ll pay the loan (years)

Example:

• 10 years → higher monthly, less interest

• 20–30 years → lower monthly, more interest

💳 Monthly Payment

Your monthly payment includes:

• Principal (loan amount)

• Interest

• Sometimes insurance/taxes

👉 This is your biggest long-term financial commitment

⚖️ Fixed vs Variable Rate

Type	Pros 👍	Cons ⚠️
Fixed Rate	Stable, predictable	Slightly higher start
Variable	Lower starting rate	Can increase later

👉 For beginners: Fixed is safer

🏠 How Much Can You Afford?

Rule of thumb:

• Spend ≤ 30% of your monthly income on housing

Example:

• Income: ₱60,000

• Max housing: ~₱18,000/month

⚠️ Extra Costs to Expect

• Taxes and fees

• Insurance

• Maintenance

• Renovations

👉 Don’t use all your savings on the down payment

✅ Quick Mortgage Checklist

• ✔ Know your budget

• ✔ Prepare your down payment

• ✔ Choose fixed vs variable rate

• ✔ Understand total monthly cost

• ✔ Plan for extra expenses

💡 Smart Tip for You

Since you:

• Earn in USD

• Are budget-conscious

👉 Consider:

• Paying a bigger down payment to reduce interest

• Choosing a shorter loan term if affordable