Table of ContentsThe How Adjustable Rate Mortgages Work DiariesThe 6-Minute Rule for Reverse Mortgages How They WorkMore About Which Of The Following Statements Is Not True About Mortgages?
There are very stringent laws that were passed in current years that require lenders do their due diligence to offer you all the choices possible to bring your home loan existing or exit homeownership with dignity. what is the interest rate for mortgages. By comprehending how your home loan works, you can protect your financial investment in your home, and will understand https://wesleyfinancialgroupscholarship.com/apply/ what actions to take if you ever have challenges making the payments.
What I wish to finish with this video is discuss what a home loan 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 bit of what you are in fact doing when you're paying a home mortgage, what it's comprised of and how much of it is interest versus how much of it is actually 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 acquire. It has a price of, let's state that I need to pay $500,000 to purchase that house, this is the seller of the home right here.
I would like 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've had the ability to save up $125,000 however I would really like to reside 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 provide me the rest of the amount I require 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. what are reverse 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 appear like, uh, uh, a great guy with a good task who has an excellent credit ranking.
We need to have that title of your home and as soon as you pay off the loan we're going to provide you the title of the house. So what's going to happen 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 says who actually owns the home, so this is the house 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, perhaps they haven't settled 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 mortgage is. And really it originates from old French, mort, suggests dead, dead, and the gage, suggests promise, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead promise.
As soon as I settle the loan this pledge of the title to the bank will die, it'll come back to me (which fico score is used for mortgages). Which's why it's called a dead pledge or a home loan. And most likely due to the fact that it originates from old French is the reason that we do not say mort gage. We state, mortgage.
They're truly referring to the home mortgage, mortgage, the home loan. And what I desire to perform in the rest of this video is use a little screenshot from a spreadsheet I made to actually reveal you the math or in fact reveal 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, home mortgage, or in fact, even much better, simply 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.
But just go to this https://www.inhersight.com/company/wesley-financial-group-llc URL and after that you'll see all of the files there and then you can just download this file if you desire to have fun with it. But what it does here is in this sort of dark brown color, these are the presumptions that you could input which you can change these cells in your spreadsheet without breaking the entire spreadsheet.
I'm purchasing a $500,000 home. It's a 25 percent down payment, so that's the $125,000 that I had actually conserved up, that I 'd talked about right over there. And then the, uh, loan amount, well, I have the $125,000, I'm going to need to obtain $375,000. It calculates it for us and then I'm going to get a pretty plain vanilla loan.
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So, thirty years, it's going to be a 30-year set rate home loan, fixed rate, fixed rate, which implies the rates of interest won't alter. We'll talk about that in a bit. This 5.5 percent that I am paying on my, on the cash that I borrowed will not alter throughout the 30 years.
Now, this little tax rate that I have here, this is to actually determine, what is the tax cost savings of the interest reduction on my loan? And we'll speak about that in a 2nd, we can disregard it in the meantime. And after that these other things that aren't in brown, you should not mess with these if you actually do open up this spreadsheet yourself.
So, it's actually the annual rates of interest, 5.5 percent, divided by 12 and most home loan loans are intensified on a month-to-month basis - what are mortgages interest rates today. So, at the end of monthly 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 interesting issue. However for a $500,000 loan, well, a $500,000 home, a $375,000 loan over 30 years at a 5.5 percent rate of interest. My home loan payment is going to be roughly $2,100. Now, right when I purchased your house I wish to introduce a bit of vocabulary and we've spoken about this in a few of the other videos.
And we're assuming that it deserves $500,000. We are presuming that it's worth $500,000. That is a property. It's a possession because it provides you future benefit, the future advantage of being able to live in it. Now, there's a liability against that asset, 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 sell the assets and settle the debt. If you sell the house you 'd get the title, you can get the cash and after that you pay it back to the bank.