Bank, can you lend me the rest of the amount I need for that house, which is essentially $375,000 (how do reverse mortgages really 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 appear like, uh, uh, a good person with a great task who has a good credit rating.
We need to have that title of your home and when you pay off the loan we're going to offer you the title of your home. 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 - how do reverse mortgages work after death.
However the title of your house, the file that states who really owns your home, so this is the home title, this is the title of the house, home, 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, perhaps they have not paid off 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 mortgage is. This pledging of the title for, as the, as the security for the loan, that's what a home loan is. And actually it originates from old French, mort, implies dead, dead, and the gage, implies promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead pledge.
As soon as I https://troymlaf542.hatenablog.com/entry/2020/09/03/211542 settle the loan this pledge of the title to the bank will pass away, it'll come back to me. And that's why it's called a dead pledge or a home mortgage. And probably because it comes from old French is the reason why we don't state mort gage. We say, home loan.
Getting My How Do Reverse Mortgages Work In California To Work
They're actually describing the home loan, mortgage, the home loan. And what I want to carry out in the rest of this video is use a little screenshot from a spreadsheet I made to really show you the mathematics or really 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, home mortgage, or actually, even better, simply go to the download, just go to the downloads, downloads, uh, folder on your web browser, you'll see a bunch of files and it'll be the file called home loan calculator, home loan calculator, calculator dot XLSX.
But just 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. how do home mortgages work. 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 alter these cells in your spreadsheet without breaking the entire spreadsheet.
I'm buying a $500,000 house. 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 then the, uh, loan quantity, well, I have the $125,000, I'm going to need to borrow $375,000. It determines it for us and then 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 interest rate won't alter. We'll speak about that in a bit. This 5.5 percent that I am paying on my, on the cash that I obtained will not alter over the course of the 30 years.
Now, this little tax rate that I have here, this is to actually find out, what is the tax savings of the interest deduction on my loan? And we'll talk about that in a 2nd, we can overlook it in the meantime. how do mortgages work in canada. And then these other things that aren't in brown, you should not mess with these if you actually do open up this spreadsheet yourself.
The Ultimate Guide To How Fha Mortgages Work When You're The Seller
So, it's literally the annual rates of interest, 5.5 percent, divided by 12 and the majority of mortgage loans are intensified on a monthly basis. So, at the end of monthly they see how much money you owe and then they will charge you this much interest on that for the month.
It's really a pretty fascinating problem. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over thirty years at a 5.5 percent rates of interest. My home loan payment is going to be approximately $2,100. Now, right when I bought your house I desire to introduce a bit of vocabulary and we have actually talked about this in some 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 property. It's a property because it provides you future benefit, the future advantage of being able to live 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 debt and if you were basically to offer the properties and settle the financial obligation. If you sell the home you 'd get the title, you can get the money and then you pay it back to the bank.
But if you were to relax this transaction immediately after doing it then you would have, you espn finance jobs would have a $500,000 house, you 'd pay off your $375,000 in financial obligation and you would get in your pocket $125,000, which is precisely what your original deposit was but this is your equity.
How Do House Mortgages Work - Questions
But you might not presume it's consistent and have fun with the spreadsheet a bit. However I, what I would, I'm presenting this due to the fact that as we pay for the financial obligation this number is going to get smaller sized. So, this number is getting smaller, let's say at some time this is just $300,000, then my equity is going to get bigger.
Now, what I have actually done here is, well, in fact before I get to the chart, let me really reveal you how I calculate the chart and I do this throughout 30 years and it goes by month. So, so you can imagine that there's really 360 rows here on the actual spreadsheet and you'll see that if you go and open it up.
So, on month no, which I do not reveal 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 before I pay any of my payments, instead of owing $375,000 at the end of the very first month I owe $376,718. Now, I'm an excellent person, I'm not going to default on my home mortgage so I make that very first home loan payment that we calculated, that we calculated right over here (how do reverse mortgages work in california).