What mortgage terms mean
The main mortgage terms are principal (the amount borrowed), interest rate (the yearly cost of borrowing it), APR (the rate plus most lender fees, for comparing offers), term (usually 15 or 30 years), points (upfront fees that lower the rate), escrow (an account for taxes and insurance), and mortgage insurance, usually required when the down payment is under 20 percent on a conventional loan.
Why it matters: A mortgage is usually the largest contract you will ever sign, and the words decide what it costs.
Steps
- Write the principal: the amount you would borrow after the down payment.
- Note the interest rate and whether it is fixed for the whole term or adjustable after a set period.
- Compare offers by APR, which folds most lender fees into one yearly figure.
- Check the term, since a shorter term raises the monthly payment but lowers total interest.
- Ask whether any points are included, what each costs and how much it lowers the rate.
- Find out whether taxes and insurance will be paid through escrow and what that adds monthly.
- Ask whether mortgage insurance applies, what it costs and when it can be removed.
Stop and call a professional if
- you need a recommendation for your own loan, policy or tax situation: ask a licensed loan officer, housing counselor, insurance agent or tax professional
- a lender pressures you to sign the same day or will not put fees in writing
Questions to ask the professional
- What is the APR, and which fees does it include?
- Is this rate fixed for the whole term?
- When could mortgage insurance come off this loan?
Common mistakes
- Comparing offers by monthly payment alone.
- Confusing the interest rate with the APR.
- Not asking when an adjustable rate can change and by how much.
- Forgetting that taxes and insurance can rise even on a fixed rate loan.
Outside the US or in another state: Loan types, disclosures and mortgage insurance rules here are US ones; other countries use different terms.
Teach this to someone
A one page sheet for showing a friend, a teenager or a parent: what to say, what to show, and one question to check it landed.
Teach: What mortgage terms mean
What to say
The main mortgage terms are principal (the amount borrowed), interest rate (the yearly cost of borrowing it), APR (the rate plus most lender fees, for comparing offers), term (usually 15 or 30 years), points (upfront fees that lower the rate), escrow (an account for taxes and insurance), and mortgage insurance, usually required when the down payment is under 20 percent on a conventional loan.
What to show
- Write the principal: the amount you would borrow after the down payment.
- Note the interest rate and whether it is fixed for the whole term or adjustable after a set period.
- Compare offers by APR, which folds most lender fees into one yearly figure.
- Check the term, since a shorter term raises the monthly payment but lowers total interest.
- Ask whether any points are included, what each costs and how much it lowers the rate.
- Find out whether taxes and insurance will be paid through escrow and what that adds monthly.
- Ask whether mortgage insurance applies, what it costs and when it can be removed.
Where it stops
Stop and call a professional if you need a recommendation for your own loan, policy or tax situation: ask a licensed loan officer, housing counselor, insurance agent or tax professional.
Check question
Which figure is best for comparing the cost of two loan offers?
Answer: The APR. APR includes most lender fees, so offers compare on the same footing.
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Sources
- US federal consumer guidance on mortgage disclosures and closing, 2025. Reviewed September 28, 2026.
Written in our own words from the sources above. It is general information, not advice for your situation; where a professional, your doctor or your lease says something different, follow them.
Last reviewed . First published .