Table of ContentsWhich Of The Following Is Not True About Mortgages for BeginnersThe Ultimate Guide To How To Shop For MortgagesRumored Buzz on What Are Interest Rates For Mortgages
There are really strict laws that were passed in recent years that require lending institutions do their due diligence to give you all the options possible to bring your home mortgage current or exit homeownership with dignity. why do mortgages get sold. By comprehending how your mortgage works, you can protect your investment in your house, and will understand what actions to take if you ever have obstacles making the payments.
What I want to finish with this video is describe what a mortgage is however I believe many of us have a least a general sense of it. But even much better than that actually enter into the numbers and comprehend a bit of what you are really doing when you're paying a home loan, what it's made up of and how much of it is interest versus how much of it is in fact paying for the loan.
Let's state that there is a house that I like, let's state that that is your home that I want to purchase. It has a price of, let's say that I require to pay $500,000 to purchase that house, this is the seller of your home right here.
I want to purchase it. I would like to buy your house. This is me right here. And I have actually been able to save up $125,000. I have actually been able 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 provide me the remainder of the quantity I need for that house, 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. what is a fixed rate 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 appear like, uh, uh, a great man with a great job who has an excellent credit score.
We have to have that title of your house and when you settle the loan we're going to give 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.
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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 your house, house, house title. It will not go to me. It will go to the bank, the home title will go from the seller, perhaps even the seller's bank, maybe they have not paid off their home loan, 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 promising of the title for, as the, as the security for the loan, that's what a home loan is. And actually it comes from old French, mort, means 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 promise 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 pledge or a home loan. And most likely because it originates from old French is the reason why we do not state mort gage. We say, home loan.
They're actually describing the home mortgage, home mortgage, the mortgage loan. And what I want to perform in the rest of this video is use a little screenshot from a spreadsheet I made to actually show you the mathematics or actually reveal 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 mortgage calculator, mortgage, or really, even better, simply go to the download, just go to the downloads, downloads, uh, folder on your web internet browser, you'll see a bunch of files and it'll be the file called home mortgage calculator, home loan calculator, calculator dot XLSX.
But 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 want to play with it. But what it does here is in this kind of dark brown color, these are the presumptions that you might input which 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 saved up, that I 'd talked about right over there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to have to borrow $375,000. It computes it for us and after that I'm going to get a pretty https://bestcompany.com/timeshare-cancellation/company/wesley-financial-group plain vanilla loan.
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So, thirty years, it's going to be a 30-year fixed rate mortgage, fixed rate, repaired rate, which means the rates of interest won't change. We'll discuss 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 thirty years.
Now, this little tax rate that I have here, this is to in fact find out, what is the tax cost savings of the interest deduction on https://www.inhersight.com/companies/best/reviews/overall my loan? And we'll discuss that in a second, we can disregard it in the meantime. And then these other things that aren't in brown, you shouldn't tinker these if you really do open this spreadsheet yourself.
So, it's literally the annual rates of interest, 5.5 percent, divided by 12 and most home loan are intensified on a regular monthly basis - what is the interest rate for mortgages. So, at the end of monthly they see just how much money you owe and then they will charge you this much interest on that for the month.
It's in fact a pretty fascinating issue. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over 30 years at a 5.5 percent interest rate. My home loan payment is going to be approximately $2,100. Now, right when I bought your home I desire to present a bit of vocabulary and we've discussed this in a few of the other videos.
And we're assuming that it's worth $500,000. We are assuming that it deserves $500,000. That is a possession. It's an asset due to the fact that 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 possessions and this is all of your debt and if you were essentially to sell the assets and settle the debt. If you offer the home you 'd get the title, you can get the cash and then you pay it back to the bank.