Table of ContentsWhich Of The Following Statements Is Not True About Mortgages? for BeginnersGet This Report on What Is The Current Interest Rate For Commercial MortgagesWhat Debt Ratio Is Acceptable For Mortgages for Dummies
There are really stringent laws that were passed in recent years that require lending institutions do their due diligence to provide you all the choices possible to bring your home loan present or exit homeownership gracefully. what are mortgages interest rates today. By understanding how your home loan works, you can safeguard your financial investment in your house, and will know what actions to take if you ever have difficulties making the payments.
What I wish to finish with this video is discuss what a home mortgage is but I believe 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 mortgage, what it's made up of and how much of it is interest versus just how much of it is in fact paying down the loan.
Let's say that there is a home that I like, let's say that that is the home that I would like to purchase. It has a cost tag of, let's state that I need to pay $500,000 to purchase that house, this is the seller of the home right here.
I wish to purchase it. I want to purchase your home. This is me right here. And I have actually been able to conserve up $125,000. I've had the ability to save up $125,000 but I would truly like to reside 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 amount 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. which type of interest is calculated on home 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 good person with a good task who has a great credit score.
We have to have that title of your home and when you pay off the loan we're going to give 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 https://www.globenewswire.com/news-release/2020/06/25/2053601/0/en/Wesley-Financial-Group-Announces-New-College-Scholarship-Program.html it's $375,000, $375,000 loan.
What Does Who Offers 40 Year Mortgages Do?
But the title of your house, the file that says who actually owns your house, so this is the house title, this is the title of your home, home, house title. It will not go to me. It will go to the bank, the home title will go from the seller, possibly even the seller's bank, possibly 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 home loan is. This vowing of the title for, as the, as the security for the loan, that's what a home loan is. And really it originates from old French, mort, implies dead, dead, and the gage, indicates promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it comes from dead promise.
When I settle the loan this pledge of the title to the bank will die, it'll return to me (reverse mortgages are most useful for elders who). And that's why it's called a dead promise or a home mortgage. And most likely due to the fact that it comes from old French is the reason that we do not state mort gage. We say, home mortgage.
They're truly referring to the home mortgage, home mortgage, the home loan. And what I want to do in the rest of this video is use a little screenshot from a spreadsheet I made to in fact show you sellmy timeshare the math or in fact show 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, mortgage, or really, 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 home mortgage calculator, home mortgage calculator, calculator dot XLSX.
However simply go to this URL and then you'll see all of the files there and after that you can just download this file if you wish to have fun with it. However what it does here is in this sort of dark brown color, these are the assumptions that you might input which you can alter these cells in your spreadsheet without breaking the entire 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 talked about right there. And then the, uh, loan amount, well, I have the $125,000, I'm going to have to borrow $375,000. It determines it for us and after that I'm going to get a quite plain vanilla loan.
The 3-Minute Rule for How Do Mortgages Work
So, 30 years, it's going to be a 30-year set rate home loan, fixed rate, repaired rate, which indicates the rate of interest will not alter. We'll discuss that in a little bit. This 5.5 percent that I am paying on my, on the cash that I borrowed will not alter over the course of the 30 years.
Now, this little tax rate that I have here, this is to in fact determine, what is the tax cost savings of the interest reduction on my loan? And we'll discuss that in a 2nd, we can overlook it for now. And after that these other things that aren't in brown, you shouldn't mess with these if you actually do open up this spreadsheet yourself.
So, it's actually the annual interest rate, 5.5 percent, divided by 12 and most mortgage are intensified on a monthly basis - how do mortgages work. So, at the end of on a monthly basis they see just how much cash you owe and then they will charge you this much interest on that for the month.
It's in fact a quite intriguing issue. However for a $500,000 loan, well, a $500,000 home, a $375,000 loan over 30 years at a 5.5 percent rates of interest. My mortgage payment is going to be roughly $2,100. Now, right when I bought your home I wish to introduce a little bit of vocabulary and we've discussed this in a few of the other videos.
And we're presuming that it's worth $500,000. We are assuming that it deserves $500,000. That is a possession. It's a property since it gives you future benefit, the future advantage of having the ability to reside in it. Now, there's a liability versus that possession, that's the mortgage, that's the $375,000 liability, $375,000 loan or financial obligation.
If this was all of your possessions and this is all of your financial obligation and if you were essentially to offer the assets and pay off the financial obligation. 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.