Table of ContentsNot known Facts About What Credit Score Model Is Used For MortgagesThe Main Principles Of How Often Are Mortgages Compounded All About What Are Subprime Mortgages
There are really strict laws that were passed in recent years that require lending institutions do their due diligence to provide you all the alternatives possible to bring your home mortgage existing or exit homeownership with dignity. why do mortgages get sold. By understanding how your mortgage works, you can secure your financial investment in your home, and will know what actions to take if you ever have difficulties making the payments.
What I wish to do with this video is describe what a home mortgage is however I believe many of us have a least a general sense of it. But even much better than that in fact best western timeshare go into the numbers and understand a bit of what you are actually doing when you're paying a mortgage, what it's made up 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 home that I like, let's state that that is your home that I wish 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 wish to purchase it. I wish to purchase your home. This is me right here. And I've been able to conserve up $125,000. I've had the ability to conserve up $125,000 however I would really 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 lend me the rest of the quantity I require 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 the interest rate for 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 look like, uh, uh, a great guy with a good job who has a good credit rating.
We need to have that title of your home and when you pay off the loan we're going to provide 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.
What Are Adjustable Rate Mortgages Can Be Fun For Everyone
But the title of your house, the file that says who in fact owns your timeshares in atlanta ga house, so this is the home title, this is the title of the 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 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 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, suggests promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead pledge.
When I settle the loan this pledge of the title to the bank will pass away, it'll return to me (what are reverse mortgages). Which's why it's called a dead pledge or a home loan. And probably since it originates from old French is the reason we do not state mort gage. We state, home loan.
They're really describing the mortgage, home loan, the mortgage. And what I wish to perform in the rest of this video is use a little screenshot from a spreadsheet I made to really reveal you the mathematics or in fact reveal you what your home mortgage payment is going to. And you can download, you can download this spreadsheet at Khan Academy, khanacademy.org/downloads, downloads, slash home mortgage calculator, mortgage, or actually, even better, just go to the download, simply go to the downloads, downloads, uh, folder on your web browser, you'll see a bunch of files and it'll be the file called home loan calculator, home mortgage calculator, calculator dot XLSX.
However simply go to this URL and then you'll see all of the files there and after that you can just download this file if you wish to play with it. But what it does here remains in this kind of dark brown color, these are the assumptions that you might input and that you can change these cells in your spreadsheet without breaking the whole spreadsheet.
I'm purchasing a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had conserved up, that I 'd discussed right over there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to need to borrow $375,000. It calculates it for us and then I'm going to get a quite plain vanilla loan.
4 Easy Facts About What Is The Current Interest Rate For Mortgages? Described
So, thirty years, it's going to be a 30-year fixed rate mortgage, fixed rate, fixed rate, which indicates the interest rate won't change. We'll speak about that in a bit. This 5.5 percent that I am paying on my, on the money that I obtained will not change throughout the thirty years.
Now, this little tax rate that I have here, this is to in fact figure out, what is the tax cost savings of the interest deduction on my loan? And we'll discuss that in a second, we can neglect it in the meantime. 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 literally the annual interest rate, 5.5 percent, divided by 12 and a lot of home loan are intensified on a regular monthly basis - which fico score is used for mortgages. So, at the end of each month 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 pretty fascinating issue. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over thirty years at a 5.5 percent rate of interest. My home loan payment is going to be approximately $2,100. Now, right when I bought your home I desire to introduce a bit of vocabulary and we have actually spoken about this in a few of the other videos.
And we're assuming that it's worth $500,000. We are presuming that it's worth $500,000. That is a property. It's a property because it provides you future benefit, the future benefit of being able to live in it. Now, there's a liability versus 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 debt and if you were essentially to sell the possessions and settle the debt. If you sell your house you 'd get the title, you can get the money and then you pay it back to the bank.