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What I wish to finish with this video is explain what a home loan is but I think many of us have a least a general sense of it. However even better than that in fact go into the numbers and understand a bit of what you are really doing when you're paying a mortgage, what it's comprised of and how much of it is interest versus just how much of it is in fact paying for the loan.
Let's say that there is a home that I like, let's state that that is your house that I want to purchase (how much can i borrow mortgages). It has a cost of, let's state that I need to pay $500,000 to purchase that house, this is the seller of the home right here.
I wish to buy it. I wish to buy your home. This is me right here - how many mortgages can i have. And I have actually had the ability to conserve up $125,000. non-federal or chartered banks who broker or lend for mortgages must be registered with. I have actually been able to conserve up $125,000 but I would actually like to live in that house so I go to a bank, I go to a bank, get a new color for the bank, so that is the bank right there.
Bank, can you provide me the remainder of the amount I need for that home, which is basically $375,000. I'm putting 25 percent down, this right, this right, this number right here, that is 25 percent of $500,000. So, I ask the bank, can I have a loan for the balance? Can I have a $375,000 loan? And the bank says, sure, you seem like, uh, uh, a nice guy with a good task who has an excellent credit score.
We have to have that title of your house and as soon as you settle the loan we're going to give you the title of your home. So what's going to happen here is we're going to have the loan is going to go to me, so it's $375,000, $375,000 loan.
But the title of your home, the file that says who really owns your house, so this is the house title, https://judahuggv223.skyrock.com/3335181552-h1-style-clear-both-id-content-section-0-More-About-What-Are.html this is the title of the home, house, house title. It will not go to me. It will go to the bank, the home title will go from the seller, perhaps even the seller's bank, maybe they haven't settled their mortgage, it will go to the bank that I'm borrowing from.
So, this is the security right here. That is technically what a mortgage is. This vowing of the title for, as the, as the security for the loan, that's what a home mortgage is. And really it comes from old French, mort, indicates dead, dead, and the gage, means pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead pledge.
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Once I settle the loan this pledge of the title to the bank will pass away, it'll come back to me. Which's why it's called a dead pledge or a home loan. And probably because it originates from old French is the reason that we do not say mort gage. what are reverse mortgages. We state, home loan.
They're really describing the mortgage, home mortgage, the home loan. And what I wish to perform in the rest of this video is use a little screenshot from a spreadsheet I made to in fact show you the math or actually reveal you what your home mortgage payment is going to. And you can download, you can download this spreadsheet at Khan Academy, khanacademy.org/downloads, downloads, slash mortgage calculator, home mortgage, or in fact, even better, simply go to the download, simply go to the downloads, downloads, uh, folder sirius radio cancellation number on your web internet browser, you'll see a lot of files and it'll be the file called home loan calculator, home loan calculator, calculator dot XLSX.
However simply go to this URL and then you'll see all of the files there and then you can simply download this file if you desire to play with it. But what it does here is in this kind of dark brown color, these are the presumptions that you could input which you can alter these cells in your spreadsheet without breaking the entire spreadsheet.
I'm buying a $500,000 home. It's a 25 percent deposit, so that's the $125,000 that I had actually saved up, that I 'd talked about right there. And then the, uh, loan amount, well, I have the $125,000, I'm going to need to obtain $375,000. It determines it for us and then I'm going to get a pretty plain vanilla loan.
So, 30 years, it's going to be a 30-year fixed rate mortgage, repaired rate, repaired rate, which implies the interest rate will not change. We'll speak about that in a bit. This 5.5 percent that I am paying on my, on the cash that I borrowed will not alter over the course of the thirty years.
Now, this little tax rate that I have here, this is to actually find out, what is the tax cost savings of the interest deduction on my loan? And we'll talk about that in a second, we can overlook it in the meantime. And after that these other things that aren't in brown, you should not mess with these if you actually do open this spreadsheet yourself.
So, it's actually the yearly interest rate, 5.5 percent, divided by 12 and the majority of mortgage are compounded on a monthly basis. So, at the end of every month they see just how much cash you owe and after that they will charge you this much interest on that for the month.
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It's really a pretty fascinating issue. However for a $500,000 loan, well, a $500,000 home, a $375,000 loan over thirty years at a 5.5 percent interest rate. My mortgage payment is going to be roughly $2,100. Now, right when I purchased your home I wish to present a bit of vocabulary and we have actually spoken about this in some of the other videos.
And we're presuming that it's worth $500,000. We are assuming that it deserves $500,000. That is a possession. It's a property because it gives you future advantage, the future advantage of being able to reside in it. Now, there's a liability against that possession, that's the mortgage loan, that's the $375,000 liability, $375,000 loan or financial obligation.
If this was all of your assets and this is all of your debt and if you were basically to sell the possessions and pay off the debt. If you sell the house you 'd get the title, you can get the cash and after that you pay it back to the bank.
However if you were to relax this deal instantly after doing it then you would have, you would have a $500,000 house, you 'd pay off your $375,000 in debt and you would get in your pocket $125,000, which is precisely what your initial deposit was however this is your equity.