Bank, can you provide me the remainder of the amount I require for that home, which is basically $375,000 (how do assumable mortgages work). 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 states, sure, you look like, uh, uh, a good man with a good task who has a good credit score.
We have to have that title of the house and when you settle the loan we're going to offer you the title of your house. So what's going to take place here is we're going to have the loan is going to go to me, so it's $375,000, $375,000 loan - how to reverse mortgages work.
But the title of your home, the document that says who really owns your home, so this is the home title, this is the title of the home, home, house 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, possibly they haven't paid off their home mortgage, it will go to the bank that I'm borrowing from.
So, this is the security right here. That is technically what a home mortgage is. This vowing of the title for, as the, as the security for the loan, that's what a home mortgage is. And actually it originates from old French, mort, means dead, dead, and the gage, indicates promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead pledge.
As soon as I pay off the loan this promise of the title to the bank will die, it'll return to me. And that's why it's called a dead pledge or a mortgage. And most likely since it originates from old French is the reason we do not state mort gage. We say, mortgage.
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They're actually referring to the mortgage, mortgage, the mortgage. And what I desire to perform in the rest of this video is utilize a little screenshot from a spreadsheet I made to really show you the mathematics 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 home loan calculator, mortgage, or in fact, even better, simply go to the download, just go to the downloads, downloads, uh, folder on your web internet browser, you'll see a bunch of files and it'll be the file called home mortgage calculator, home mortgage calculator, calculator dot XLSX.
But simply go to this URL and after that you'll see all of the files there and after that you can simply download this file if you desire to play with it. how do buy to let mortgages work uk. However what it does here is in this sort of dark brown color, these are the presumptions that you could input which you can alter these cells in your spreadsheet without breaking the whole spreadsheet.
I'm purchasing a $500,000 home. It's a 25 percent down payment, so that's the $125,000 that I had actually saved up, that I 'd discussed right there. And after that the, uh, loan quantity, well, I have the $125,000, I'm going to have to Website link borrow $375,000. It calculates it for us and after that I'm going to get a pretty plain vanilla loan.
So, thirty years, it's going to be a 30-year set rate home loan, repaired rate, repaired rate, which suggests the rates of interest won't change. We'll talk about that in a bit. This 5.5 percent that I am paying on my, on the cash that I borrowed will not change over the course of the thirty years.
Now, this little tax rate that I have here, this is to in fact find out, what is the tax cost savings of the interest reduction on my loan? And we'll talk about that in a 2nd, we can overlook it for now. how do escrow accounts work for mortgages. And after that these other things that aren't in brown, you shouldn't mess with these if you really do open up this spreadsheet yourself.
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So, it's actually the annual rates of interest, 5.5 percent, divided by 12 and a lot of mortgage are intensified on a month-to-month basis. So, at the end of on a monthly basis they see how much money you owe and after that they will charge you this much interest on that for the month.
It's actually a quite fascinating problem. 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 approximately $2,100. Now, right when I purchased the home I wish to present a little bit of vocabulary and we've talked about this in a few of the other videos.
And we're presuming that it's worth $500,000. We are assuming that it's worth $500,000. That is a property. It's a possession since it provides you future advantage, the future advantage of having the ability to reside in it. Now, there's a liability against that possession, that's the mortgage, that's the $375,000 liability, $375,000 loan or financial obligation.
If this was all of your properties and this is all of your financial obligation and if you were basically to sell the possessions and settle the debt. If you sell your home 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 right away after https://zenwriting.net/repriaogzn/if-the-loan-provider-takes-your-house-in-a-foreclosure-youand-39-ll-likewise doing it then you would have, you would have a $500,000 house, you 'd settle your $375,000 in financial obligation and you would get in your pocket $125,000, which is exactly what your original down payment was but this is your equity.
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However you could not presume it's constant and have fun with the spreadsheet a little bit. However I, what I would, I'm introducing this because as we pay down the financial obligation this number is going to get smaller sized. So, this number is getting smaller, let's state eventually this is just $300,000, then my equity is going to get bigger.
Now, what I've done here is, well, really before I get to the chart, let me actually reveal you how I calculate the chart and I do this over the course of 30 years and it goes by month. So, so you can picture that there's actually 360 rows here on the real spreadsheet and you'll see that if you go and open it up.
So, on month no, which I do not show here, you obtained $375,000. Now, throughout that month they're going to charge you 0.46 percent interest, keep in mind that was 5.5 percent divided by 12. 0.46 percent interest on $375,000 is $1,718.75. So, I haven't made any home mortgage payments yet.
So, now prior to I pay any of my payments, rather of owing $375,000 at the end of the very first month I owe $376,718. Now, I'm a great person, I'm not going to default on my home loan so I make that first mortgage payment that we calculated, that we calculated right over here (how do reverse mortgages work in california).