Table of ContentsThe smart Trick of How Many Mortgages Can I Have That Nobody is Talking AboutA Biased View of When Did Reverse Mortgages StartWhat Is The Current Interest Rate For Mortgages? Fundamentals Explained
There are really strict laws that were passed in current years that require loan providers do their due diligence to provide you all the options possible to bring your home loan current or exit homeownership with dignity. how long are mortgages. By understanding how your mortgage works, you can safeguard your investment in your house, and will understand what actions to take if you ever have challenges making the payments.
What I desire to do with this video is describe what a home loan is however I believe the majority of us have a least a general sense of it. However even better than that in fact enter into the numbers and comprehend a bit of what you are really 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 in fact paying for the loan.
Let's say that there is a home that I like, let's state that that is your house that I wish to acquire. 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 would like to purchase it. I want to purchase the home. This is me right here. And I've been able to save up $125,000. I've had the ability to conserve up $125,000 however I would actually like to live in that https://www.inhersight.com/company/wesley-financial-group-llc 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 provide me the rest of the amount 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 states, sure, you look like, uh, uh, a good guy with a great job who has a great credit rating.
We have to have that title of your home and as soon as you pay off the loan we're going to give 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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However the title of the home, the file that states who really owns your house, so this is the house title, this is the title of your home, house, house 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 haven't 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 mortgage is. This vowing of the title for, as the, as the security for the loan, that's what a home loan is. And in fact it originates from old French, mort, means dead, dead, and the gage, suggests promise, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead promise.
As soon as I pay off the loan this pledge of the title to the bank will die, it'll return to me (what is a fixed rate mortgages). And that's why it's called a dead promise or a home mortgage. And most likely because it comes from old French is the reason we do not state mort gage. We say, mortgage.
They're really describing the home mortgage, mortgage, the mortgage. 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 math 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, home loan, or really, even much 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 home mortgage calculator, home loan calculator, calculator dot XLSX.
However just go to this URL and then you'll see all of the files there and then you can simply download this file if you wish to have fun with it. 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 change these cells in your spreadsheet without breaking the whole spreadsheet.
I'm buying a $500,000 home. 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 after that the, uh, loan amount, well, I have the $125,000, I'm Home page going to have to borrow $375,000. It calculates it for us and after that I'm going to get a pretty plain vanilla loan.
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So, 30 years, it's going to be a 30-year fixed rate home loan, repaired rate, fixed rate, which indicates the interest rate won't alter. We'll speak about that in a bit. This 5.5 percent that I am paying on my, on the money that I borrowed will not change 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 savings of the interest reduction on my loan? And we'll talk about that in a 2nd, we can disregard it in the meantime. And then these other things that aren't in brown, you shouldn't tinker these if you really do open up this spreadsheet yourself.
So, it's literally the annual rates of interest, 5.5 percent, divided by 12 and most mortgage loans are intensified on a monthly basis - reverse mortgages how they work. 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 quite fascinating problem. But 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 bought your house I desire to introduce a little 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 assuming that it's worth $500,000. That is a possession. It's an asset due to the fact that it offers you future advantage, the future benefit of being able to live in it. Now, there's a liability against that property, that's the mortgage, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your possessions and this is all of your financial obligation and if you were essentially to sell the properties 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.