Table of ContentsExcitement About How Reverse Mortgages WorkSome Ideas on Who Offers 40 Year Mortgages You Should KnowWhat Is The Current Interest Rate For Home Mortgages Things To Know Before You Buy
There are extremely stringent laws that were passed in recent years that need lending institutions do their due diligence to offer you all the alternatives possible to bring your mortgage present or exit homeownership gracefully. which type of credit is usually used for cars. By understanding how your mortgage works, you can protect your financial investment in your house, and will understand what actions to take if you ever have difficulties making the payments.
What I want to make with this video is describe what a mortgage is but I believe the majority of us have a least a general sense of it. But even much better than that really enter into the numbers and understand a little bit of what you are really doing when you're paying a home mortgage, what it's made up of and just how much of it is interest versus just how much of it is actually paying for the loan.
Let's state that there is a home that I like, let's say that that is your house that I want to purchase. It has a cost 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 would like to purchase it. I would like to purchase the home. This is me right here. And I've had the ability to conserve up $125,000. I have actually been able to conserve up $125,000 but I would actually like to reside in that home 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 rest 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 Look at more info right here, that is 25 percent of $500,000. why do mortgages get sold. 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 guy with an excellent job who has a great credit ranking.
We need to have that title of your house and when you pay off the loan we're going to give you the title of your house. 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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But the title of the house, the document that states who really owns the home, so this is the house title, this is the title of the home, home, 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 settled their mortgage, 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 mortgage is. And in fact it comes from old French, mort, indicates dead, dead, and the gage, implies promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it comes from dead promise.
When I pay off the loan this promise of the title to the bank will pass away, it'll return to me (what is the current interest rate for mortgages). Which's why it's called a dead pledge or a home loan. And most likely since it originates from old French is the reason we don't state mort gage. We say, mortgage.
They're really describing the mortgage, mortgage, the home loan. And what I want to perform in the rest of this video is use a little screenshot from a spreadsheet I made to in fact reveal you the math 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 mortgage calculator, home loan, or in fact, even 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 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 then you can just download this file if you want to have fun with it. But what it does here remains in this kind of dark brown color, these are the assumptions 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 actually conserved up, that I 'd spoken about right over there. And after that the, uh, loan quantity, well, I have the $125,000, I'm going to need to obtain $375,000. It computes it for us and after that I'm going to get a pretty plain vanilla loan.
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So, 30 years, it's going to be a 30-year fixed rate mortgage, repaired rate, repaired rate, which means the rate of interest will not change. 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 throughout the 30 years.
Now, this little tax rate that I have here, this is to in fact determine, what is the tax savings of the interest deduction on my loan? And we'll talk about that in a 2nd, we can ignore it for now. And then these other things that aren't in brown, you shouldn't tinker these if you actually do open up this spreadsheet yourself.
So, it's actually the annual rate of interest, 5.5 percent, divided by 12 and most mortgage are intensified on a month-to-month basis - how much can i borrow 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 actually a pretty intriguing issue. But for a $500,000 loan, well, a $500,000 home, a $375,000 loan over 30 years at a 5.5 percent interest rate. My home mortgage payment is going to be approximately $2,100. Now, right when I purchased your home I wish to introduce a 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 presuming that it deserves $500,000. That is a property. It's a property due to the fact that it gives you future advantage, the future benefit of being able to live in it. Now, there's a liability against that asset, that's the mortgage loan, 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 basically to sell the properties and pay off the debt. If you offer your home you 'd get the title, you can get the cash and after that you pay it back to timeshare cancellation industry the bank.