Table of ContentsThe smart Trick of How To Mortgages That Nobody is Discussing10 Simple Techniques For Why Are Mortgages SoldSome Of Which Of The Following Statements Is True Regarding Home Mortgages?
There are very rigorous laws that were passed in current years that require lending institutions do their due diligence to give you all the alternatives possible to bring your mortgage current or exit homeownership gracefully. how do reverse mortgages work. By comprehending how your home mortgage works, you can protect your investment in your house, and will know what actions to take if you ever have obstacles making the payments.
What I wish to do with this video is discuss what a mortgage is however I believe most of us have a least a basic sense of it. However even much better than that really 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 how much of it is interest versus how much of it is actually paying down the loan.
Let's say that there is a house that I like, let's say that that is the house that I would like to purchase. It has a price of, let's say that I require to pay $500,000 to buy that home, this is the seller of your home right here.
I want to purchase it. I want to buy your home. This is me right here. And I've been able to conserve up $125,000. I have actually been able to save up $125,000 but I would really like to live in that home 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 lend 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. what are mortgages interest rates today. 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 look like, uh, uh, a good person with an excellent task who has an excellent credit rating.
We need to have that title of your house and once you pay off the loan we're going to provide you the title of the 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.
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But the title of your home, the document that says who really owns your house, so this is the house title, this is the title of your home, house, 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 haven't 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 mortgage is. This vowing of the title for, as the, as the security for the loan, that's what a mortgage is. And really it originates from old French, mort, implies dead, dead, and the gage, suggests promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead pledge.
Once I settle the loan this promise of the title to the bank will die, it'll come back to me (which type of credit is usually used for cars). And that's why it's called a dead promise or a home mortgage. And most likely since it comes from old French is the reason we do not say mort gage. We say, mortgage.
They're really describing the home loan, home mortgage, the mortgage. And what I want to perform in the rest of this video is use a little screenshot from a spreadsheet I made to actually reveal you the math or really 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 mortgage calculator, home loan, or in fact, even better, just go to the download, simply go to the downloads, downloads, uh, folder on your web browser, you'll see a lot of files and it'll be the file called home mortgage calculator, home loan calculator, calculator dot XLSX.
However just go to this URL and after that you'll see all of the files there and after that https://apnews.com/Globe%20Newswire/36db734f7e481156db907555647cfd24 you can simply download this file if you want to play with it. But what it does here remains in this type of dark brown color, these are the assumptions that you might input and that you can david tavarez change these cells in your spreadsheet without breaking the entire spreadsheet.
I'm purchasing a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had saved up, that I 'd discussed right over there. And after that the, uh, loan quantity, well, I have the $125,000, I'm going to have to borrow $375,000. It computes it for us and then I'm going to get a quite plain vanilla loan.
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So, 30 years, it's going to be a 30-year set rate home loan, repaired rate, fixed rate, which indicates the rate of interest won't change. We'll discuss 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 determine, what is the tax savings of the interest reduction on my loan? And we'll speak about that in a second, we can neglect it in the meantime. And after that these other things that aren't in brown, you should not mess with these if you really do open up this spreadsheet yourself.
So, it's literally the yearly rates of interest, 5.5 percent, divided by 12 and many mortgage are intensified on a regular monthly basis - how do mortgages work. So, at the end of monthly they see just how much cash you owe and after that they will charge you this much interest on that for the month.
It's in fact a quite interesting issue. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over thirty years at a 5.5 percent rate of interest. My home mortgage payment is going to be roughly $2,100. Now, right when I purchased your house I wish to present a bit of vocabulary and we've talked about this in some of the other videos.
And we're presuming that it deserves $500,000. We are assuming that it's worth $500,000. That is a property. It's an asset because it offers you future benefit, the future advantage of having the ability to live in it. Now, there's a liability versus that property, that's the home mortgage 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 financial obligation and if you were essentially to offer the properties and settle the financial obligation. If you offer the home you 'd get the title, you can get the cash and then you pay it back to the bank.