Table of ContentsThe smart Trick of How To Reverse Mortgages Work That Nobody is Talking AboutThe Of Why Banks Sell MortgagesNot known Details About How Do Interest Rates Affect Mortgages
There are very stringent laws that were passed in current years that require loan providers do their due diligence to give you all the options possible to bring your mortgage existing or exit homeownership gracefully. how much can i borrow mortgages. By comprehending how your home mortgage works, you can secure your investment in your house, and will know what actions to take if you ever have obstacles making the payments.
What I wish to finish with this video is discuss what a home loan is but I think the majority of us have a least a basic sense of it. But even much better than that in fact enter into the numbers and understand a little bit of what you are in fact 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 really paying down the loan.
Let's state that there is a house that I like, let's say that that is the house that I would like to buy. It has a rate tag of, let's say that I need to pay $500,000 to buy that home, this is the seller of your house right here.
I would like to purchase it. I wish to buy your house. This is me right here. And I have actually been able to save up $125,000. I've had the ability to conserve up $125,000 but I would really like to live in that house 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 lend me the remainder 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. how many mortgages can i have. 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 appear like, uh, uh, a great man with an excellent job who has a great credit rating.
We need to have that title of the house and when you pay off the loan we're going to offer you the title of the 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.
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However the title of your house, the file that states who in fact owns your home, so this is the home title, this is the title of the home, home, 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 home loan is. This vowing of the title for, as the, as the security for the loan, that's what a home mortgage is. And really it comes from old French, mort, means dead, dead, and the gage, means pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead promise.
When I pay off the loan this promise of the title to the bank will die, it'll return to me (what are points in mortgages). And that's why it's called a dead pledge or a mortgage. And most likely because it originates from old French is the reason why we don't say mort gage. We say, home loan.
They're truly describing the mortgage, home loan, the mortgage loan. And what I wish to do in the rest of this video is utilize a little screenshot from a spreadsheet I made to really show you the math or actually show 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 mortgage calculator, mortgage, or in fact, even 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, mortgage calculator, calculator dot XLSX.
But just go to this URL and after that 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 remains in this sort of dark brown color, these are the assumptions that you could input which you can change these cells in your spreadsheet without breaking the entire spreadsheet.
I'm purchasing a $500,000 house. It's a 25 percent down payment, so that's the $125,000 that I had actually saved up, that I 'd talked about right there. And then the, uh, loan amount, well, I have the $125,000, I'm going to have to obtain $375,000. It determines it for us and after that I'm going to get a quite plain vanilla loan.
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So, thirty years, it's going to be a 30-year fixed rate home loan, fixed rate, repaired rate, which implies the rate of interest will not alter. 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 throughout the 30 years.
Now, this little tax rate that I have here, this is to really find out, what is the tax cost savings of the interest reduction on my loan? And we'll talk about that in a second, we can ignore it for now. And then these other things that aren't in brown, you shouldn't mess with these if you actually do open up this spreadsheet yourself.
So, it's literally the yearly rates of interest, 5.5 percent, divided by 12 and many mortgage are intensified on a month-to-month basis - what is a fixed rate mortgages. So, at the end of each month they see 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 intriguing issue. However for a $500,000 loan, well, a $500,000 home, a $375,000 loan over 30 years at https://www.businesswire.com/news/home/20200115005652/en/Wesley-Financial-Group-Founder-Issues-New-Year%E2%80%99s a 5.5 percent interest rate. My mortgage payment is going to be approximately $2,100. Now, right when I bought your home I want to present a bit of vocabulary and we've talked 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 because it provides you future advantage, the future benefit of being able to live in it. Now, there's a liability versus that asset, that's the home loan, that's the $375,000 liability, $375,000 loan or financial obligation.
If this was all of your possessions and this is all of your debt and if you were basically to offer the assets and pay off the debt. If you sell the home Learn more you 'd get the title, you can get the cash and after that you pay it back to the bank.