Table of Contents9 Easy Facts About Which Type Of Interest Is Calculated On Home Mortgages ShownHow Do Interest Rates Affect Mortgages for BeginnersThe Only Guide for How To Reverse Mortgages Work
What I desire to do with this video is explain what a home loan is but I think many of us have a least a general sense of it. But even much better than that in fact go into the numbers and comprehend a little bit of what you are really doing when you're paying a mortgage, what it's comprised of and how much of it is interest versus just how much of it is really paying down the loan.
Let's state that there is a home that I like, let's say that that is the house that I wish to purchase (how do mortgages work). It has a price of, let's state that I need to pay $500,000 to buy that house, this is the seller of your house right here.
I want to purchase it. I wish to purchase your home. This is me right here - how to sell mortgages. And I've been able to save up $125,000. which of the statements below is most correct regarding adjustable rate mortgages?. I have actually been able to save up $125,000 but I would really like to reside in that home 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 amount I need for that house, 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. 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 great man with a good 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 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.
However the title of your home, the file that states who really 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 house title will go from the seller, perhaps even the seller's bank, possibly they have not settled their home loan, it will go to the bank that I'm borrowing 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 mortgage is. And really it originates from old French, mort, means dead, dead, and the gage, implies pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead pledge.
Some Known Factual Statements About How Are Mortgages Compounded
Once I settle the loan this pledge of the title to the bank will pass away, it'll come back to me. And that's why it's called a dead pledge or a home mortgage. And most likely because it originates from old French is the reason that we do not state mort gage. what is the current interest rate for mortgages. We say, mortgage.
They're actually describing the mortgage, home mortgage, the mortgage loan. And what I wish to perform in the rest of this video is use a little screenshot from a spreadsheet I made to really show 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 mortgage calculator, mortgage, or really, even much better, simply go to the download, simply 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 loan calculator, home rent my timeshare mortgage calculator, calculator dot XLSX.
But just go to http://manuelwlqb141.fotosdefrases.com/rumored-buzz-on-what-is-required-down-payment-on-mortgages this URL and after that you'll see all of the files there and then you can just download this file if you wish to play with it. But what it does here remains in this sort of dark brown color, these are the presumptions that you could 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 deposit, so that's the $125,000 that I had saved up, that I 'd spoken about right over there. And after that the, uh, loan amount, well, I have the $125,000, I'm going to need to borrow $375,000. It calculates it for us and after that I'm going to get a pretty plain vanilla loan.
So, 30 years, it's going to be a 30-year fixed rate mortgage, repaired rate, repaired rate, which implies the interest rate won't 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 over the course of the thirty years.
Now, this little tax rate that I have here, this is to actually figure out, what is the tax cost savings of the interest deduction on my loan? And we'll discuss that in a 2nd, we can neglect it in the meantime. 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 rates of interest, 5.5 percent, divided by 12 and many home loan are compounded on a monthly basis. So, at the end of each month they see how much cash you owe and then they will charge you this much interest on that for the month.
Not known Facts About How Do Banks Make Money On Reverse Mortgages
It's actually a pretty fascinating issue. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over 30 years at a 5.5 percent interest rate. My home loan payment is going to be approximately $2,100. Now, right when I purchased your house I wish to introduce a little bit of vocabulary and we've spoken about this in some of the other videos.
And we're presuming that it's worth $500,000. We are presuming that it's worth $500,000. That is an asset. It's an asset due to the fact that it offers you future advantage, the future benefit of having the ability to reside in it. Now, there's a liability versus that property, that's the mortgage, that's the $375,000 liability, $375,000 loan or financial obligation.
If this was all of your properties and this is all of your financial obligation 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 cash and then you pay it back to the bank.
However if you were to relax this transaction immediately 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 exactly what your initial deposit was but this is your equity.