Banking · Video Lesson

What is a Mortgage?

A mortgage is how most people buy a home. This lesson introduces what a mortgage is, how a home loan works as a secured loan with the house as collateral, who offers mortgages, and how the term and interest rate shape the monthly payment and the total cost over the life of the loan.

Grades 7–12 Video Lesson 30–45 minutes Free Lesson

For Teachers

Lesson at a glance

Topic: Banking
Grade Level: Grades 7–12
Resource Type: Video Lesson + Worksheet
Estimated Time: 30–45 minutes
Format: Class discussion + activity
Materials: Video, worksheet, whiteboard

What Students Learn

Learning objectives

Define a mortgage as a loan used to buy a home
Explain how a mortgage is a secured loan with the home as collateral
Identify who offers mortgages and how repayment works
Compare fixed-rate and adjustable-rate mortgages
Explain how a shorter vs. longer term affects monthly payments and total interest

Video Lesson

Watch: What is a Mortgage?

Materials

What you’ll need

Internet access for the video
Printed copies of the worksheet (one per student)
Whiteboard or projector for the discussion
Optional: a simple mortgage payment calculator

Key Terms

Vocabulary

Mortgage: A loan used to buy a house or other real estate, also called a home loan.
Collateral: An asset (here, the home) pledged to secure a loan; the lender can take it if the loan isn’t repaid.
Secured loan: A loan backed by collateral, which lowers the lender’s risk.
Principal: The amount of money borrowed, not counting interest.
Interest: The cost of borrowing, charged as a percentage of the principal.
Fixed-rate mortgage: A mortgage whose interest rate stays the same for the life of the loan.
Term: The length of time over which the mortgage is repaid, such as 15 or 30 years.
Default: Failing to make required loan payments, which can let the lender take the collateral.

For Teachers

Lesson plan

Estimated time: one 30–45 minute class period.

Lesson sequence

Introduction (5 min). Ask: if a house costs far more than someone has saved, how do they buy it? Introduce the mortgage.
Watch the video (8 min). Play the lesson video. Ask students to note who lends and what happens if payments stop.
How a mortgage works (12 min). Cover the lender paying for the home up front, the borrower repaying with interest in monthly payments, and the home as collateral on a secured loan (and what default means).
Term and rate (8 min). Compare fixed vs. adjustable rates, and how a shorter term means higher payments but less total interest, while a longer term means lower payments but more total interest.
Worksheet (8 min). Students complete the worksheet based on the video.

Extension activity

Compare two loans. Using a simple calculator, students compare a 15-year and a 30-year mortgage on the same amount and explain the trade-off.

Assessment

Assess participation, the comparison activity, and the completed worksheet.

This lesson is for educational purposes only and is not financial advice.

Discussion

Discussion questions

What makes a mortgage a “secured” loan, and why does that matter to the lender?
What happens if a borrower stops making mortgage payments?
How does a shorter loan term change the monthly payment and the total interest paid?
Why might someone choose a fixed-rate mortgage over an adjustable-rate one?
What factors would help you decide which mortgage is right for your situation?

Printable Worksheet