A home mortgage is a loan from a bank or other financial institution, sometime even by the seller of the property. The house and/or property serve as collateral for the loan. Homeowner's typically pay off the loan in monthly payments over 15 to 30 years.

What Makes Up A Payment?
A monthly mortgage payment typically includes the principal, interest, and real estate taxes, also known as PITI. Also included could be Private Mortgage Insurance (PMI), depending on how much you paid on the down payment.

During the years of the mortgage, a homeowner pays a lot of money toward interest in order to have manageable monthly payments on the huge house debt. The process of paying the principal takes years because mortgages are based on a repayment plan called amortization. During the first few years, most of the mortgage payments will be applied toward the interest. During the final years of the loan, the payments will be applied primarily to the remaining principal.

Private Mortgage Insurance (PMI) gives the bank or lender protection if the homeowner should default on the loan. The mortgage company charges insurance if the down payment is less than 20 percent of the sale price or appraised value. PMI usually can be eliminated once the principal balance of the mortgage reaches 80 percent of the sale price or appraised value, which is known as the loan-to-value (LTV) ratio.