Bank, can you lend me the remainder of the quantity I need for that house, which is essentially $375,000 (how do reverse mortgages work in florida). 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 look like, uh, uh, a great man with a great job who has an excellent credit rating.
We have to have that title of your home and as soon as you pay off the loan we're going to offer 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 - how does chapter 13 work with mortgages.
But the title of the home, the file that says who in fact owns the home, so this is the home title, this is the title of the home, house, home 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, possibly they haven't settled 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 loan is. This vowing of the title for, as the, as the security for the loan, that's what a home mortgage is. And actually it comes from old French, mort, suggests dead, dead, and the gage, means 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 pledge of the title to the bank will die, it'll return to me. And that's why it's called a dead pledge or a mortgage. And most likely because it comes from old French is the factor why we do not state mort gage. We say, mortgage.
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They're really referring to the home loan, home mortgage, the home loan. And what I wish to perform in the rest of this video is utilize a little screenshot from a spreadsheet I made to in fact reveal you the math or in fact reveal 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, simply 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 mortgage calculator, mortgage calculator, calculator dot XLSX.
However just go to this URL and after that you'll see all of the files there and after that you can simply download this file if you wish to have fun with it. how do commercial mortgages work. But 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 home. It's a 25 percent down payment, so that's the $125,000 that I had actually conserved up, that I 'd discussed right there. And after that the, uh, loan quantity, well, I have the $125,000, I'm going to have to borrow $375,000. It calculates it for us and after that I'm going to get a quite plain vanilla loan.
So, 30 years, it's going to be a 30-year set rate mortgage, repaired rate, fixed rate, which suggests the rate of interest won't alter. We'll discuss that in a 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 thirty years.
Now, this little tax rate that I have here, this is to really figure out, what is the tax cost savings of the interest deduction on my loan? And we'll speak about that check here in a 2nd, we can disregard it in the meantime. how home mortgages work. And then these other things that aren't in brown, you should not mess with these if you really do open this spreadsheet yourself.
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So, it's literally the annual rates of interest, 5.5 percent, divided by 12 and the majority of home mortgage loans are compounded on a monthly basis. So, at the end of on a monthly basis they see how much money you owe and after that 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 home, a $375,000 loan over thirty years at a 5.5 percent rate of interest. My mortgage payment is going to be roughly $2,100. Now, right when I bought the home I wish to present a little bit of vocabulary and we have actually spoken about this in a few of the other videos.
And we're presuming that it deserves $500,000. We are presuming that it's worth $500,000. That is a property. It's a possession due to the fact that it offers you future benefit, the future benefit of being able to reside in it. Now, there's a liability versus that asset, that's the mortgage loan, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your possessions and this is all of your debt and if you were essentially to offer the assets and pay off the debt. If you offer your house you 'd get the title, you can get the cash and then you pay it back to the bank.
However if you were to relax this transaction instantly after doing it then you would have, you would have a $500,000 home, you 'd pay off your $375,000 in debt and you would get in your pocket $125,000, which is precisely what your original down payment was however this is your equity.
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However you might not https://www.evernote.com/shard/s414/sh/62269f02-15ef-215f-0080-4460df663380/0d9b849315cc130152f7c3182aee9460 presume it's continuous and play with the spreadsheet a bit. But I, what I would, I'm presenting this since as we pay for the debt this number is going to get smaller sized. So, this number is getting smaller sized, let's state eventually this is only $300,000, then my equity is going to get larger.
Now, what I've done here is, well, in fact before I get to the chart, let me actually show you how I determine the chart and I do this throughout 30 years and it goes by month. So, so you can imagine that there's in fact 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 borrowed $375,000. Now, over the course of that month they're going to charge you 0.46 percent interest, bear in mind that was 5.5 percent divided by 12. 0.46 percent interest on $375,000 is $1,718.75. So, I have not made any mortgage payments yet.
So, now before I pay any of my payments, rather of owing $375,000 at the end of the first month I owe $376,718. Now, I'm a good person, I'm not going to default on my mortgage so I make that first home loan payment that we determined, that we calculated right over here (how do down payments work on mortgages).