Table of ContentsWhat Does How To Sell Mortgages Mean?The Main Principles Of When To Refinance Mortgages What Does What Are Reverse Mortgages And How Do They Work Do?
What I wish to do with this video is describe what a home mortgage is however I think the majority of us have a least a general sense of it. However even better than that in fact go into the numbers and comprehend a little bit of what you are really doing when you're paying a home loan, what it's comprised of and just how much of it is interest versus just how much of it is actually paying down the loan.
Let's state that there is a home that I like, let's state that that is your home that I would like to acquire (which fico score is used for mortgages). It has a price of, let's state that I require to pay $500,000 to buy that home, this is the seller of the home right here.
I wish to buy it. I want to buy your home. This is me right here - how do reverse mortgages work. And I've had the ability to save up $125,000. why are reverse mortgages bad. I have actually had the ability to save up $125,000 but I would really 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 remainder of the quantity I require 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. 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 seem like, uh, uh, a great person with a great task who has a great credit rating.
We have to have that title of your house and once you pay off the loan we're going to offer 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.
But the title of the home, the file that says who really owns your house, so this is the home https://blogfreely.net/throccgkln/b-table-of-contents-b-a-g6x6 title, this is the title of your house, house, 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, maybe they have not 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 loan is. This pledging of the title for, as the, as the security for the loan, that's what a mortgage is. And in fact it originates from old French, mort, implies dead, dead, and the gage, indicates pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead pledge.
What Is A Min Number For Mortgages Can Be Fun For Anyone
When I pay off the loan this pledge of the title to the bank will pass away, it'll return to me. Which's why it's called a dead promise or a home loan. And probably due to the fact that it originates from old French is the reason that we do not say mort gage. which type of interest is calculated on home mortgages. We state, home mortgage.
They're actually referring to the mortgage, home loan, the mortgage. And what I wish to do in the rest of this video is utilize a little screenshot from a spreadsheet I made to actually reveal you the mathematics or in fact show 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 mortgage calculator, home loan, or really, even much better, simply 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, mortgage calculator, calculator dot XLSX.
But just 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 want to play with it. However what it does here is in this type 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 purchasing a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had actually saved up, that I 'd discussed right there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to have to obtain $375,000. It computes it for us and after that I'm going to get a quite plain vanilla loan.
So, 30 years, it's going to be a 30-year fixed rate home mortgage, repaired rate, repaired rate, which means the rate of interest will not alter. We'll discuss that in a bit. This 5.5 percent that I am paying on my, on the money that I borrowed will not change over the course of the 30 years.
Now, this little tax rate that I have here, this is to in fact figure out, what is the tax cost savings of the interest deduction on my loan? And we'll discuss that in a second, we can disregard it for now. 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 rate of interest, 5.5 percent, divided by 12 and a lot of home loan are intensified on a regular monthly basis. So, at the end of every month they see just how much cash you owe and then they will charge you this much interest on that for the month.
What Is The Current Interest Rate For Mortgages? Fundamentals Explained
It's actually a quite fascinating problem. But for a $500,000 loan, well, a $500,000 home, 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 your home I want to introduce a bit of vocabulary and we have actually spoken about this in a few of the other videos.
And we're presuming that it's worth $500,000. We are presuming that it deserves $500,000. That is a possession. It's an asset because it provides you future benefit, the future advantage of having the ability to reside in it. Now, there's a liability versus that asset, 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 financial obligation and if you were basically to sell the possessions and pay off the debt. If you offer your home you 'd get the title, you can get the cash and then you pay it back to the bank.
However if you were to unwind this deal right away after 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 Click for more info your pocket $125,000, which is precisely what your original down payment was but this is your equity.