Table of ContentsThe How Much Can I Borrow Mortgages StatementsThe Definitive Guide to How Do Interest Rates Affect MortgagesOur How To Sell Reverse Mortgages Diaries
What I Find more information want to do with this video is discuss what a mortgage is however I think many of us have a least a basic sense of it. However even better than that actually enter into the numbers and understand a little bit of what you are actually doing when you're paying a mortgage, what it's made up of and just how much of it is interest versus just how much of it is in fact paying down the loan.
Let's say that there is a house that I like, let's say that that is your home that I wish to acquire (how do reverse mortgages work). It has a price of, let's say that I need to pay $500,000 to purchase that home, this is the seller of the home right here.
I would like to buy it. I wish to buy your home. This is me right here - how mortgages work. And I have actually had the ability to save up $125,000. what are mortgages. 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 new color for the bank, so that is the bank right there.
Bank, can you lend me the rest of the quantity I need for that home, 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. 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 nice man with a great job who has an excellent credit rating.
We have to have http://daltontlfl171.lucialpiazzale.com/h1-style-clear-both-id-content-section-0-which-of-the-following-statements-is-not-true-about-mortgages-can-be-fun-for-everyone-h1 that title of your home and when you settle the loan we're going to give you the title of your home. 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 the house, the file that says who actually owns your house, so this is the house title, this is the title of your 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, possibly they have not paid off 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 loan is. This promising of the title for, as the, as the security for the loan, that's what a home mortgage is. And actually it originates from old French, mort, implies dead, dead, and the gage, means promise, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead promise.
Fascination About What Is The Interest Rate For Mortgages Today
Once I pay off 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 promise or a home mortgage. And most likely due to the fact that it comes from old French is the reason why we do not state mort gage. what is a fixed rate mortgages. We state, mortgage.
They're truly referring to the home loan, mortgage, the home loan. And what I wish to carry out in the rest of this video is use a little screenshot from a spreadsheet I made to really show you the mathematics or actually 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 home loan calculator, home loan, 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 lot of files and it'll be the file called home mortgage calculator, mortgage calculator, calculator dot XLSX.
But simply go to this URL and then you'll see all of the files there and then you can just download this file if you wish to have fun with it. But what it does here remains in this sort 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 entire spreadsheet.
I'm buying a $500,000 house. 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 then the, uh, loan quantity, well, I have the $125,000, I'm going to have to borrow $375,000. It computes it for us and then I'm going to get a pretty plain vanilla loan.
So, thirty years, it's going to be a 30-year fixed rate mortgage, fixed rate, fixed rate, which indicates the rate 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 obtained will not alter over the course of the thirty years.
Now, this little tax rate that I have here, this is to in fact find out, what is the tax cost savings of the interest deduction on my loan? And we'll speak about that in a second, we can disregard it in the meantime. And then these other things that aren't in brown, you shouldn't tinker these if you in fact do open up this spreadsheet yourself.
So, it's literally the annual interest rate, 5.5 percent, divided by 12 and the majority of mortgage are compounded on a month-to-month basis. 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.
Which Type Of Interest Is Calculated On Home Mortgages Can Be Fun For Everyone
It's actually a quite 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 home mortgage payment is going to be approximately $2,100. Now, right when I purchased the house I want to introduce a bit of vocabulary and we have actually talked 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 a possession. It's an asset because it gives you future advantage, the future advantage of being able to reside in it. Now, there's a liability against that asset, that's the mortgage, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your assets and this is all of your financial obligation and if you were basically to offer the assets and pay off the financial obligation. If you offer your house you 'd get the title, you can get the cash and after that you pay it back to the bank.
But if you were to relax this deal 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 initial deposit was however this is your equity.