Table of ContentsThe 9-Minute Rule for Reverse Mortgages How Do They WorkThe How Much Do Mortgages Cost StatementsWhat Are Today's Interest Rates On Mortgages - An Overview
There are extremely rigorous laws that were passed in current years that need lenders do their due diligence to give you all the choices possible to bring your home loan existing or exit homeownership gracefully. reverse mortgages how they work. By understanding how your mortgage works, you can secure your financial investment in your home, and will know what actions to take if you ever have difficulties making the payments.
What I desire to finish with this video is explain what a mortgage is however I think the majority of us have a least a general sense of it. However even better than that really go into the numbers and comprehend a bit of what you are actually doing when you're paying a home loan, what it's comprised of and just how much of it is interest versus how much of it is in fact paying for the loan.
Let's rent my timeshare week say that there is a home that I like, let's say that that is your house that I would like to buy. It has a price of, let's say that I need to pay $500,000 to buy that house, this is the seller of your house right here.
I wish to buy it. I want to purchase the house. This is me right here. And I have actually had the ability to save https://apnews.com/Globe%20Newswire/8d0135af22945c7a74748d708ee730c1 up $125,000. I've been able to save up $125,000 however I would truly like to reside in that 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 lend me the remainder of the quantity I need 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 a fixed rate mortgages. 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 person with a great job who has a great credit rating.
We have to have that title of the home and as soon as you settle the loan we're going to give you the title of the 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.
The Best Guide To How Do Banks Make Money On Reverse Mortgages
However the title of your house, the file that states who in fact owns your home, so this is the house title, this is the title of your home, home, house title. It will not go to me. It will go to the bank, the home title will go from the seller, possibly even the seller's bank, possibly they have not 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 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 comes from old French, mort, suggests dead, dead, and the gage, indicates pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead pledge.
Once I pay off the loan this pledge of the title to the bank will die, it'll return to me (how do mortgages work). Which's why it's called a dead promise or a home mortgage. And most likely since it originates from old French is the reason we don't state mort gage. We state, mortgage.
They're really referring to the home mortgage, home loan, the home loan. And what I want to do in the rest of this video is utilize a little screenshot from a spreadsheet I made to in fact reveal 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 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.
However simply go to this URL and after that you'll see all of the files there and after that 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 presumptions that you might input which 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 down payment, so that's the $125,000 that I had conserved up, that I 'd talked about right over there. And after that the, uh, loan amount, well, I have the $125,000, I'm going to have to obtain $375,000. It computes it for us and then I'm going to get a pretty plain vanilla loan.
An Unbiased View of What Is The Current Interest Rate For Mortgages?
So, thirty years, it's going to be a 30-year fixed rate home mortgage, repaired rate, fixed rate, which implies the rate of interest won't change. We'll talk about that in a little bit. This 5.5 percent that I am paying on my, on the money that I borrowed will not change throughout the thirty years.
Now, this little tax rate that I have here, this is to really figure out, what is the tax cost savings of the interest deduction on my loan? And we'll speak about that in a 2nd, we can neglect it in the meantime. And then these other things that aren't in brown, you should not tinker these if you really do open this spreadsheet yourself.
So, it's literally the annual rates of interest, 5.5 percent, divided by 12 and the majority of mortgage loans are intensified on a regular monthly basis - how long are mortgages. So, at the end of each month they see just how much cash you owe and then they will charge you this much interest on that for the month.
It's really a pretty intriguing issue. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over thirty years at a 5.5 percent interest rate. My home mortgage payment is going to be approximately $2,100. Now, right when I bought the home I wish 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 deserves $500,000. We are assuming that it's worth $500,000. That is an asset. It's a property due to the fact that it gives you future advantage, the future advantage of having the ability to live in it. Now, there's a liability against that possession, that's the home loan, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your properties and this is all of your financial obligation and if you were essentially to offer the properties and pay off the debt. If you sell the house you 'd get the title, you can get the cash and then you pay it back to the bank.