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There are very stringent laws that were passed in recent years that require lenders do their due diligence to give you all the choices possible to bring your mortgage current or exit homeownership gracefully. how https://www.inhersight.com/companies/best/reviews/overall do reverse mortgages work. By comprehending how your home loan works, you can safeguard your financial investment in your house, and will understand what actions to take if you ever have challenges making the payments.
What I desire to do with this video is describe what a home mortgage is but I think the majority of us have a least a basic sense of it. However even better than that really go into the numbers and comprehend a little bit of what you are actually doing when you're paying a home mortgage, what it's comprised of and just how much of it is interest versus just how much of it is actually paying for the loan.
Let's say that there is a house that I like, let's state that that is the home that I would like to buy. It has a cost tag of, let's state that I need to pay $500,000 to buy that house, this is the seller of your home right here.
I wish to buy 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 actually like to live in that house so I go to a bank, I go to a bank, get a new color for the bank, so that is the bank right there.
Bank, can you provide me the rest 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. how many mortgages can you have. So, I ask the bank, can I have a loan for the balance? Can I have a https://bestcompany.com/timeshare-cancellation/company/wesley-financial-group $375,000 loan? And the bank says, sure, you seem like, uh, uh, a nice guy with a good job who has a great credit score.
We need to have that title of your home and as soon as you settle the loan we're going to provide you the title of your home. So what's going to take place 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 the house, the document that says 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 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 mortgage is. This vowing of the title for, as the, as the security for the loan, that's what a mortgage is. And really it originates from old French, mort, suggests dead, dead, and the gage, implies pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead pledge.
As soon as I pay off the loan this promise of the title to the bank will pass away, it'll return to me (when to refinance mortgages). Which's why it's called a dead pledge or a home mortgage. And most likely since it comes from old French is the reason why we do not say mort gage. We say, home mortgage.
They're really referring to the home loan, mortgage, the mortgage loan. And what I want to perform in the rest of this video is utilize a little screenshot from a spreadsheet I made to in fact show you the math or actually 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 loan, or in fact, even much better, just 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 after that you'll see all of the files there and then you can simply download this file if you desire 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 buying a $500,000 home. It's a 25 percent deposit, so that's the $125,000 that I had saved up, that I 'd spoken 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 computes it for us and then I'm going to get a quite plain vanilla loan.
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So, thirty years, it's going to be a 30-year fixed rate home loan, fixed rate, repaired rate, which implies the rate of interest will not change. We'll speak about that in a bit. This 5.5 percent that I am paying on my, on the money that I borrowed will not alter throughout 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 reduction on my loan? And we'll speak about that in a second, we can ignore it in the meantime. And after that these other things that aren't in brown, you should not tinker these if you really do open up this spreadsheet yourself.
So, it's actually the annual rate of interest, 5.5 percent, divided by 12 and a lot of home mortgage loans are intensified on a regular monthly basis - what are reverse mortgages. So, at the end of every month they see just how much money you owe and after that they will charge you this much interest on that for the month.
It's in fact a pretty fascinating problem. But 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 talked about this in a few of the other videos.
And we're assuming that it's worth $500,000. We are assuming that it's worth $500,000. That is a possession. It's a property due to the fact that it provides you future benefit, the future advantage of being able to reside in it. Now, there's a liability versus that possession, that's the home loan, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your assets and this is all of your debt and if you were basically to offer the properties and pay off the debt. If you sell your home you 'd get the title, you can get the cash and after that you pay it back to the bank.