Table of Contents7 Simple Techniques For Why Are Mortgages SoldSome Known Details About Which Of The Following Is Not True About Mortgages Some Ideas on What Is The Current Interest Rate For Mortgages? You Should Know
What I wish to finish with this video is explain what a home mortgage is but I believe most of us have a least a general sense of it. However even much better than that in fact enter into the numbers and comprehend a little bit of what you are in fact doing when you're paying a home loan, what it's made up of and just how much of it is interest versus how much of it is in fact paying down the loan.
Let's state that there is a home that I like, let's state that that is your house that I want to buy (how many mortgages can i have). It has a price of, let's say that I need to pay $500,000 to purchase that home, this is the seller of your house right here.
I would like to purchase it. I would like to buy the house. This is me right here - how do mortgages work. And I have actually had the ability to save up $125,000. why are reverse mortgages bad. I've been able to save up $125,000 but I would truly like to live in that home so I go to a bank, I go to a bank, get a brand-new color for the bank, so that is the bank right there.
Bank, can you provide me the rest of the quantity 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 appear like, uh, uh, a good person with an excellent task who has an excellent credit rating.
We have to have that title of your home and as soon as you settle the loan we're going to provide you the title of your home. So what's going to occur here is we're going to have the loan is going to go to me, so it's $375,000, $375,000 loan.
However the title of your home, the file that states who in fact owns your home, so this is the house title, this is the title of your house, home, home title. It will not go to me. It will go to the bank, the house title will go from the seller, perhaps even the seller's bank, maybe they have not settled their home loan, it will go to the bank that I'm obtaining from.
So, this is the security right here. That is technically what a home loan is. This pledging of the title for, as the, as the security for the loan, that's what a home loan is. And in fact it originates from old http://troygnhj160.theburnward.com/the-ultimate-guide-to-how-do-lenders-make-money-on-reverse-mortgages French, mort, suggests dead, dead, and the gage, means pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead pledge.
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Once I pay off the loan this pledge of the title to the bank will die, it'll return to me. Which's why it's called a dead promise or a home mortgage. And probably because it originates from old French is the reason we don't say mort gage. what is the current interest rate for mortgages. We say, home loan.
They're actually referring to the home mortgage, mortgage, the mortgage loan. And what I wish to carry out in the rest of this video is utilize a little screenshot from a spreadsheet I made to in fact show you the math or in fact reveal you what your home loan payment is going to. And you can download, you can download this spreadsheet at Khan Academy, khanacademy.org/downloads, downloads, slash mortgage calculator, mortgage, or really, even much better, just go to the download, simply go to the downloads, downloads, uh, folder on your web internet browser, you'll see a lot of files and it'll be the file called mortgage calculator, home mortgage calculator, calculator dot XLSX.
But just go to this URL and after that you'll see all wesley financial group bad reviews of the files there and after that you can simply download this file if you wish to have fun with it. However what it does here remains in this kind of dark brown color, these are the assumptions that you might input which you can change these cells in your spreadsheet without breaking the entire spreadsheet.
I'm buying a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had conserved up, that I 'd talked about right there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to have to obtain $375,000. It calculates it for us and after that I'm going to get a quite plain vanilla loan.
So, thirty years, it's going to be a 30-year set rate mortgage, fixed rate, repaired rate, which means the interest rate won't alter. We'll talk about that in a little bit. This 5.5 percent that I am paying on my, on the cash that I obtained will not change over the course of the 30 years.
Now, this little tax rate that I have here, this is to really figure out, what is the tax cost savings of the interest reduction on my loan? And we'll discuss that in a second, we can disregard it in the meantime. And after that these other things that aren't in brown, you shouldn't tinker these if you really do open this spreadsheet yourself.
So, it's literally the annual rates of interest, 5.5 percent, divided by 12 and the majority of mortgage loans are compounded on a regular monthly basis. So, at the end of each 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 actually a pretty intriguing problem. But for a $500,000 loan, well, a $500,000 house, a $375,000 loan over 30 years at a 5.5 percent rate of interest. My home loan payment is going to be roughly $2,100. Now, right when I bought the home I wish to introduce a little bit of vocabulary and we have actually talked about this in some of the other videos.
And we're presuming that it deserves $500,000. We are assuming that it deserves $500,000. That is an asset. It's a property since it provides you future advantage, the future advantage of having the ability to live in it. Now, there's a liability against that possession, that's the home loan, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your properties and this is all of your debt and if you were basically to sell the possessions and pay off the financial obligation. If you sell your house you 'd get the title, you can get the money and then you pay it back to the bank.
But if you were to unwind this deal immediately after doing it then you would have, you would have a $500,000 house, you 'd settle your $375,000 in debt and you would get in your pocket $125,000, which is exactly what your original down payment was however this is your equity.