9 of the Most Googled Mortgage Questions

Whether you’re dreaming of owning your first house or living in your third or fourth home, mortgages can seem complicated and a little daunting. That’s why thousands of people ask Google mortgage-related questions every day.

Here, Nerdwallet offers up some of the most common questions about mortgage rates, calculating payments, choosing the best lender, getting preapproved and refinancing—along with helpful answers and tools to get and manage a mortgage with ease.

1. What is a mortgage, and how does it work?

A mortgage is a loan and a legally binding contract. When you sign a mortgage agreement, you promise to repay the loan in full. You also agree to let your lender repossess the property if you don’t. Mortgages are provided by banks, credit unions and companies that are known as non-bank lenders.

The lender you choose has a big impact on how much your monthly payment is and how much your mortgage ultimately costs. Comparing the origination fee and annual percentage rate (APR) from a variety of lenders can help you make the best choice.

2. What are current mortgage rates?

All mortgage lenders charge interest—a fee paid on top of the original loan amount to finance your home purchase. Mortgage interest rates vary by lender and can change daily.

The lower your rate, the better. Comparing daily interest rates over time can signal when it might be a good time to buy and help you estimate your mortgage payment. Rates that are steady or falling may mean savings for buyers, but if rates are rising, quick action can help you stay on budget.

3. How much mortgage can I afford?

Many experts recommend that your mortgage payment and other monthly debts shouldn’t total more than 36 percent of your monthly income, but only you can decide what’s affordable.

A mortgage lender can tell you the maximum amount you can borrow, but that doesn’t mean it’s affordable. Borrowing less than you qualify for leaves some wiggle room in your budget in case money gets tight in the future.

4. How much will my mortgage payment be?

The amount of your monthly mortgage payment depends on the amount of your loan, your lender’s interest rate, and the property tax and insurance rates in your area, among other expenses.

You could try to figure out the total payment on paper, but this mortgage calculator makes it much easier. Try entering different values for home price, down payment, interest rate, and loan term to see how it affects the monthly payment.

5. What is private mortgage insurance?

Private mortgage insurance (or PMI) protects your lender. If you stop making your house payments, the mortgage insurer pays your lender a portion of your mortgage balance.

If your down payment is less than 20 percent of the home’s price, you’ll probably have to pay for mortgage insurance. The cost (or premium) is added into your monthly mortgage payment.

6. How do I get preapproved for a mortgage?

You’ll need to discuss your credit history, income and assets with a lender to get preapproved. You’ll then complete a loan application and be asked to support your answers with financial documents, such as tax forms, pay stubs and bank statements.

Your lender will use this information to approve (or deny) your application with a maximum loan amount. Preapproval isn’t a guarantee of a mortgage, but it can help you know your price range. And when it comes time to make an offer, a pre-approval letter will demonstrate to sellers that you’re a serious buyer who likely will follow through on your offer.

7. How do I pay off a mortgage faster?

Every mortgage has a term, or set number of years it takes to pay it off with monthly payments. If you want to pay it off faster than that, you’ll usually need to make larger or more frequent payments. Refinancing is another way to pay off your mortgage faster.

For example, if your current mortgage has a 30-year term, you could refinance into a 20- or 15-year loan. A shorter term means your monthly payment will probably increase. The reward for refinancing and taking on the bigger payment usually is a lower interest rate, which means you’ll spend less during the life of the loan.

8. How do I refinance a mortgage?

You’ll need a lender and a set of goals to refinance a mortgage. Refinancing might be a good idea if it lowers your monthly payment, reduces the loan term or provides a lower interest rate. Just like a regular mortgage, refinancing requires a credit check, an appraisal, and in many cases, paying closing costs.

9. What is a reverse mortgage and how does it work?

This is a way for homeowners older than 62 to turn positive home equity into cash. Equity is the difference between what a house is worth and what’s owed on the mortgage. In a typical mortgage, monthly payments are made to your lender and your mortgage balance goes down over time.

With a reverse mortgage, the lender pays you a portion of your equity each month. Because interest and fees continue to accrue, your mortgage balance increases during time. Reverse mortgages most are often paid off by selling the home.

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