Table of ContentsHow Reverse Mortgages How They Work can Save You Time, Stress, and Money.How Many Mortgages Should I Apply For Can Be Fun For AnyoneThe 45-Second Trick For How Mortgages Interest Is Calculated
There are very strict laws that were passed in current years that require lending institutions do their due diligence to give you all the options possible to bring your mortgage current or exit homeownership with dignity. reverse mortgages how they work. By comprehending how your home loan works, you can protect your financial investment in your home, and will know what actions to take if you ever have difficulties making the payments.
What I want to do with this video is explain what a home mortgage is but I believe many of us have a least a basic sense of it. But even better than that actually enter into the numbers and comprehend a little bit of what you are in fact doing when you're paying a home mortgage, what it's comprised of and just how much of it is interest versus just how much of it is actually paying for the loan.
Let's state that there is a house that I like, let's say that that is your house that I want to buy. It has a cost of, let's state that I need to pay $500,000 to buy that house, this is the seller of your house right here.
I want to purchase it. I would like to buy your home. This is me right here. And I've had the ability to save up $125,000. I've had the ability to conserve up $125,000 however I would truly like to live in that house 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 lend me the rest of the quantity I need for that home, which is essentially $375,000. I'm putting 25 percent down, this right, this right, this number right here, that is 25 percent of $500,000. what is the current interest rate for commercial mortgages?. 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 nice guy with an excellent job who has a great credit score.
We need to have that title of your house and when you settle the loan we're going to provide you the title of your house. 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.
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However the title of your house, the file that states who actually owns the home, so this is the house title, this is the title of your home, https://twitter.com/wesleygroupllc home, home title. It will not go to me. It will go to the bank, the house title will go from the seller, maybe even the seller's bank, perhaps they have not settled 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 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 originates from old French, mort, implies dead, dead, and the gage, means pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, but it comes from dead pledge.
When I pay off the loan this promise of the title to the bank will die, it'll return to me (what are mortgages interest rates today). And that's why it's called a dead pledge or a home loan. And most likely because it originates from old French is the factor why we do not state mort gage. We say, mortgage.
They're actually referring to the mortgage, home mortgage, the home loan. And what I wish to do in the rest of this video is use a little screenshot from a spreadsheet I made to in fact reveal you the mathematics or in fact reveal https://apnews.com/Globe%20Newswire/36db734f7e481156db907555647cfd24 you what your mortgage 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 much 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 mortgage calculator, mortgage 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 wish to play with it. However what it does here is in this sort of dark brown color, these are the presumptions that you might input and that you can change these cells in your spreadsheet without breaking the whole spreadsheet.
I'm purchasing a $500,000 home. It's a 25 percent deposit, so that's the $125,000 that I had actually conserved up, that I 'd talked about 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 calculates it for us and after that I'm going to get a quite plain vanilla loan.
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So, thirty years, it's going to be a 30-year fixed rate home mortgage, fixed rate, fixed rate, which means the rate of interest 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 throughout the 30 years.
Now, this little tax rate that I have here, this is to really determine, what is the tax cost savings of the interest reduction on my loan? And we'll speak about that in a 2nd, we can ignore it in the meantime. And after that these other things that aren't in brown, you shouldn't tinker these if you in fact do open this spreadsheet yourself.
So, it's literally the annual rate of interest, 5.5 percent, divided by 12 and most mortgage are compounded on a regular monthly basis - what is the current interest rate for commercial mortgages?. So, at the end of on a monthly basis they see how much money you owe and then they will charge you this much interest on that for the month.
It's in fact a quite interesting problem. 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 loan payment is going to be roughly $2,100. Now, right when I bought the home I want to introduce a bit of vocabulary and we have actually discussed this in a few of the other videos.
And we're assuming that it's worth $500,000. We are assuming that it's worth $500,000. That is an asset. It's a property since it offers 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, 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 financial obligation and if you were basically to sell the properties and settle the debt. If you offer your home you 'd get the title, you can get the money and after that you pay it back to the bank.