Most adults know that they’ll need a home mortgage in order to buy a house. Yet until they start the process, many do not fully understand what a home mortgage is. A home mortgage is basically the same thing as a car loan, with a much larger amount of money involved. The bank’s name is on the title until the day you make your last payment. Like a car payment, your home mortgage payment is divided between interest and principal, with very little going to principal, or what you actually owe on the loan, for about the first half of the loan term.

Unlike a car loan payment, which only covers the loan and not the taxes and insurance, a home mortgage payment generally includes an escrow amount for property taxes and homeowners insurance. By federal law, your lender is required to fully explain where your monthly payment goes, what it covers, and how much a home mortgage will actually cost over the life of the loan, including interest.