Table of ContentsThe 10-Second Trick For Which Of The Following Statements Is Not True About Mortgages?The Of What Credit Score Model Is Used For MortgagesThe smart Trick of How To Reverse Mortgages Work That Nobody is Discussing
There are very strict laws that were passed in recent years that require loan providers do their due diligence to give you all the choices possible to bring your home loan present or exit homeownership gracefully. reverse mortgages how they work. By understanding how your mortgage works, you can secure your investment in your house, and will know what actions to take if you ever have challenges making the payments.
What I wish to make with this video is discuss what a home loan is but I think many of us have a least a general sense of it. However even much better than that really go into the numbers and understand a little bit of what you are really doing when you're paying a home loan, what it's made up of and just how much of it is interest versus how much of it is really paying down the loan.
Let's say that there is a home that I like, let's state that that is the house that I wish to purchase. It has a price of, let's state that I require to pay $500,000 to purchase that home, this is the seller of your home right here.
I want to buy it. I would like to purchase your home. This is me right here. And I have actually been able to save up $125,000. I've been able to conserve 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 rest of the quantity I require 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. how mortgages work. 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 nice man with a great 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 the 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.
Why Do Banks Sell Mortgages Can Be Fun For Anyone
But the title of the home, the document that says who in fact owns the home, so this is the home title, this is the title of your home, 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, perhaps 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 mortgage is. This pledging 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, means dead, dead, https://www.elkvalleytimes.com/news/business/wesley-financial-group-provides-nearly-million-in-timeshare-debt-relief/article_4be24045-0034-5e07-a6ac-d57ec8d31fcd.html and the gage, indicates promise, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead promise.
When I settle the loan this promise of the title to the bank will pass away, it'll come back to me (what are mortgages). And that's why it's called a dead pledge or a home loan. And most likely due to the fact that it originates from old French is the reason why we don't say mort gage. We say, home mortgage.
They're really describing the home mortgage, home mortgage, the mortgage loan. And what I wish to perform in the rest of this video is use a little screenshot from a spreadsheet I made to really show you the mathematics or really reveal you what your home 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, home mortgage, or actually, even much 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 mortgage 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 simply download this file if you want to have fun with it. But what it does here remains in this type of dark brown color, these are the presumptions that you might input which you can change 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 talked about right over there. And after that the, uh, loan amount, well, I have the $125,000, I'm going to have to obtain $375,000. It computes it for us and then I'm going to get a pretty plain vanilla loan.
What Does What Is The Interest Rate On Mortgages Mean?
So, 30 years, it's going to be a 30-year set rate mortgage, repaired rate, repaired rate, which indicates the interest rate will not alter. We'll talk about that in a little bit. This 5.5 percent that I am paying on my, on the money 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 figure out, what is the tax savings of the interest deduction on my loan? And we'll discuss that in a second, we can overlook it in the meantime. And after that these other things that aren't in brown, you shouldn't mess with these if you in fact do open this spreadsheet yourself.
So, it's literally the annual interest rate, 5.5 percent, divided by 12 and the majority of home loan are intensified on a monthly basis - when to refinance mortgages. 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 actually a quite interesting problem. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over 30 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 the house I want to introduce a bit of vocabulary and we have actually discussed this in a few of the other videos.
And we're presuming that it deserves $500,000. We are assuming that it deserves $500,000. That is a possession. It's an https://www.globenewswire.com/news-release/2020/06/25/2053601/0/en/Wesley-Financial-Group-Announces-New-College-Scholarship-Program.html asset because it gives you future benefit, the future benefit of being able to reside in it. Now, there's a liability against that asset, that's the home mortgage loan, that's the $375,000 liability, $375,000 loan or financial obligation.
If this was all of your properties and this is all of your debt and if you were essentially to offer the assets and settle the financial obligation. If you offer your home you 'd get the title, you can get the cash and after that you pay it back to the bank.