Table of ContentsNot known Details About How Long Are Mortgages An Unbiased View of How Long Are MortgagesSome Known Questions About Why Do Banks Sell Mortgages.
There are really strict laws that were passed in recent years that need loan providers do their due diligence to give you all the alternatives possible to bring your home loan existing or exit homeownership gracefully. what are reverse mortgages. By comprehending how your home mortgage works, you can safeguard your financial investment in your home, and will know what actions to take if you ever have challenges https://www.facebook.com/wesleyfinancialgroup making the payments.
What I wish to do with this video is discuss what a mortgage is but I believe most of us have a least a basic sense of it. But even 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 loan, what it's comprised of and how much of it is interest versus how much of it is really paying down the loan.
Let's say that there is a house that I like, let's say that that is your house that I want to buy. It has a rate tag of, let's say that I require to pay $500,000 to purchase that home, this is the seller of your home right here.
I wish to buy it. I wish to purchase your home. This is me right here. And I have actually had the ability to conserve up $125,000. I have actually been able to save up $125,000 but I would actually like to live 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 lend me the remainder of the quantity I need 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. 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 says, sure, you appear like, uh, uh, a nice guy with an excellent job who has an excellent credit rating.
We need to have that title of your home and once you pay off the loan we're going to offer you the title of your house. 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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But the title of the house, the document that says who actually owns your house, so this is the home title, this is the title of your house, house, home 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 Go here loan, that's what a home mortgage is. And actually it comes from old French, mort, indicates dead, dead, and the gage, means pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead promise.
When I pay off the loan this promise of the title to the bank will pass away, it'll come back to me (why do mortgages get sold). And that's why it's called a dead pledge or a home loan. And probably because it comes from old French is the reason we do not say mort gage. We state, mortgage.
They're actually describing the home loan, mortgage, the home loan. And what I desire to carry out in the rest of this video is utilize a little screenshot from a spreadsheet I made to in fact reveal you the mathematics or in fact show 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 home loan calculator, mortgage, or actually, even much better, simply go to the download, just go to the downloads, downloads, uh, folder on your web internet browser, you'll see a lot of files and it'll be the file called home loan calculator, mortgage calculator, calculator dot XLSX.
However simply 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 desire to play with it. However what it does here is in this kind of dark brown color, these are the assumptions that you could input and that 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 deposit, so that's the $125,000 that I had actually saved up, that I 'd discussed right there. And then 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 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 rates of interest won't change. We'll speak about that in a bit. This 5.5 percent that I am paying on my, on the cash that I borrowed will not alter over the course of the thirty years.
Now, this little tax rate that I have here, this is to really determine, what is the tax savings of the interest reduction on my loan? And we'll speak about that in a 2nd, we can overlook it for now. And after that these other things that aren't in brown, you shouldn't mess with these if you really do open up this spreadsheet yourself.
So, it's actually the yearly rate of interest, 5.5 percent, divided by 12 and many home loan are compounded on a month-to-month basis - how much can i borrow mortgages. So, at the end of on a monthly basis 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 interesting problem. However 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 mortgage payment is going to be approximately $2,100. Now, right when I purchased your home I want to introduce a little bit of vocabulary and we have actually 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 property. It's an asset because it gives you future benefit, the future benefit of being able to reside 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 assets and this is all of your financial obligation and if you were essentially to offer the possessions and pay off the financial obligation. If you offer the home you 'd get the title, you can get the cash and then you pay it back to the bank.