A mortgage is the cheapest type of credit that you are likely to be offered. The interest is usually only 1 or 2% above the base rate, and in some introductory offers it might actually be below it for the first year or two.

The reason the interest rate is lower than for other forms of credit is that the loan is secured on property on which the loan is given. This means that if you get behind with payments, the mortgage lender can throw you out of the house and sell it to raise the money that you owe them. They may give you back anything left over from the sale of the house after they have taken the money you owe, plus the interest, plus other charges. But they usually make sure that their charges and expenses are so high that they can keep the whole lot.

So the lender has very little risk in lending you money secured on a house. People can do a “Moonlight” to avoid paying their other debts, but they can’t take the house with them.

Because you are borrowing on a mortgage over a long period, usually 25 years or sometimes more, the interest you pay will add up to a great deal of money. As we have seen, if you borrow $150,000 at an APR of 5.2% for 25 years you will repay a total of $268,335 over 25 years. $118,335 of that will be interest payments.

In exchange for these interest payments, you have the benefit of the use of the house for the period before you have paid for it. So you can look at that $118,335 as a form of rent paid for the right to live in the house, while the capital repayments of $150,000 is what you actually pay to buy it.

As we have seen, with interest rates as low as they are in the early years of the 21st century, the amount of interest you will pay will often be quite a bit less than the rent you would have to pay as a tenant in an unfurnished similar property.