Table of ContentsThe How Do Reverse Mortgages Work PDFsWhat Are The Different Types Of Mortgages for BeginnersWhat Are The Current Interest Rates For Mortgages - Truths
What I want to finish with this video is explain what a mortgage is but I think many of us have a least a general sense of it. However even better than that in fact go into the numbers and comprehend a little bit of what you are in fact doing when you're paying a home mortgage, what it's comprised of and just how much of it is interest versus just how much of it is really paying for the loan.
Let's say that there is a house that I like, let's say that http://camrusukeb.nation2.com/the-main-principles-of-what-is-the-interest-rate-f that is your home that I would like to buy (which type of credit is usually used for cars). It has a rate tag of, let's say that I need to pay $500,000 to purchase that house, this is the seller of your house right here.
I want to purchase it. I wish to purchase your house. This is me right here - which of the statements below is most correct regarding adjustable rate mortgages?. And I have actually been able to conserve up $125,000. how to sell mortgages. I've been able to save up $125,000 but I would actually 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 rest of the quantity I require for that home, 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. 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 guy with a good task who has an excellent credit rating.
We have to have that title Helpful site of your house and once you pay off the loan we're going to offer you the title of your 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.
But the title of the home, the document that states who actually owns your house, so this is the home title, this is the title of your house, house, house title. It will not go to me. It will go to the bank, the house title will go from the seller, maybe even the seller's bank, possibly they haven't paid off their home loan, it will go to the bank that I'm borrowing from.
So, this is the security right here. That is technically what a mortgage is. This pledging of the title for, as the, as the security for the loan, that's what a mortgage is. And actually it comes 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.
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As soon as 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 probably due to the fact that it comes from old French is the reason that we do not say mort gage. why do mortgages get sold. We state, home mortgage.
They're actually describing the mortgage, mortgage, the home mortgage loan. And what I desire to carry out in the rest of this video is use a little screenshot from a spreadsheet I made to actually show you the math or really show 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 mortgage calculator, mortgage, or really, even much better, just go to the download, just 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 mortgage calculator, home mortgage calculator, calculator dot XLSX.
However just go to this URL and then you'll see all of the files there and after that you can just download this file if you wish to play with it. But what it does here remains in this sort of dark brown color, these are the assumptions that you might 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 conserved up, that I 'd discussed right there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to have to borrow $375,000. It determines it for us and after that I'm going to get a quite plain vanilla loan.
So, thirty years, it's going to be a 30-year set rate home mortgage, fixed rate, fixed rate, which means the rates of interest will not change. We'll speak about that in a bit. This 5.5 percent that I am paying on my, on the money that I obtained will not change over the course of 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 discuss that in a second, we can ignore it in the meantime. And after that these other things that aren't in brown, you should not tinker these if you in fact do open up this spreadsheet yourself.
So, it's actually the annual rates of interest, 5.5 percent, divided by 12 and a lot of mortgage are compounded on a month-to-month basis. So, at the end of each month they see how much cash you owe and after that they will charge you this much interest on that for the month.
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It's actually a quite intriguing issue. But for a $500,000 loan, well, a $500,000 home, a $375,000 loan over thirty years at a 5.5 percent interest rate. My home mortgage payment is going to be roughly $2,100. Now, right when I bought the house I desire to introduce a little bit of vocabulary and we've spoken about this in some of the other videos.
And we're assuming that it deserves $500,000. We are presuming that it deserves $500,000. That is a property. It's an asset since it gives you future advantage, the future advantage of having the ability to live in it. Now, there's a liability versus that property, 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 debt and if you were basically to sell the assets and pay off the financial obligation. If you sell the home you 'd get the title, you can get the money and then 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 house, you 'd pay off your $375,000 in debt and you would get in your pocket $125,000, which is exactly what your initial deposit was but this is your equity.