Mortgage
A loan used to purchase real property, secured by the property itself as collateral.
Definition
A mortgage is a loan agreement in which a lender provides funds to purchase real property, and the property itself serves as collateral. If the borrower fails to make payments, the lender can foreclose on the property to recover the loan balance.
For investment properties, conventional conforming mortgages typically require 20–25% down, have competitive interest rates (prime + 0.5–1%), and are fully amortizing over 15 or 30 years. Investment property rates are generally 0.5–1% higher than primary residence rates due to perceived higher risk.
Investors face limits on the number of conventional mortgages they can hold (Fannie Mae limits are 10 financed properties per borrower). Beyond that limit, investors turn to portfolio lenders, commercial loans, or debt products like DSCR loans that have fewer restrictions.
Related Terms
Amortization
The process of paying off a loan through regular scheduled payments of principal and interest.
PITI
Principal, Interest, Taxes, and Insurance — the four components of a monthly mortgage payment.
Loan-to-Value (LTV)
The ratio of a loan's balance to the property's appraised value, expressed as a percentage.
Debt Service
The total cash required to cover loan payments — both principal and interest — over a given period.
Refinance
Replacing an existing loan with a new loan — often to access equity, lower the rate, or change loan terms.
Leverage
Using borrowed capital (debt) to increase the potential return on an investment.
Also in "M"
Market Value
The price a property would sell for in a competitive market between a willing buyer and seller.
Maximum Allowable Offer (MAO)
The highest price an investor can pay for a property and still achieve their target profit.
Multifamily Property
A residential building containing two or more housing units — from duplexes to large apartment complexes.