Table of ContentsThe Definitive Guide to Which Type Of Organization Does Not Provide Home Mortgages?Little Known Facts About How Mortgages Work.Some Known Facts About What Is The Interest Rate On Reverse Mortgages.
What I want to make with this video is describe what a home loan is however I think the majority of us have a least a general sense of it. But even better than that actually go into the numbers and understand a little bit of what 9009 carothers pkwy franklin tn 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 actually paying for the loan.
Let's state that there is a home that I like, let's state that that is your home that I want to purchase (why do banks sell mortgages). It has a cost tag of, let's state that I need to pay $500,000 to purchase that home, this is the seller of your house right here.
I wish to buy it. I would like to buy the home. This is me right here - how do second mortgages work. And I have actually been able to save up $125,000. what is the current interest rate for mortgages. I've had the ability to conserve 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 brand-new color for the bank, so that is the bank right there.
Bank, can you provide me the rest 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. 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 great man with a good task who has an excellent credit score.
We have to have that title of your house and as soon as you pay off the loan we're going to offer you the title of the home. 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.
But the title of the home, the document that says who really owns your house, so this is the house title, this is the title of your house, home, home title. It will not go to me. It will https://andersonjlug569.tumblr.com/post/627798125503971328/h1-style-clearboth go to the bank, the home title will go from the seller, maybe even the seller's bank, perhaps 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 home loan is. And really it comes from old French, mort, suggests dead, dead, and the gage, means promise, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead pledge.
3 Easy Facts About What Is The Current Interest Rate For Commercial Mortgages Explained
Once I settle the loan this pledge of the title to the bank will pass away, it'll come back to me. Which's why it's called a dead pledge or a home loan. And most likely because it originates from old French is the reason we don't state mort gage. which fico score is used for mortgages. We say, mortgage.
They're actually referring to the mortgage, home loan, the mortgage. And what I wish to perform in the rest of this video is use a little screenshot from a spreadsheet I made to actually show you the math or really reveal 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 home mortgage calculator, mortgage, or in fact, even 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 home loan calculator, home loan 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 and that 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 deposit, so that's the $125,000 that I had actually saved up, that I 'd spoken about right there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to need to obtain $375,000. It computes it for us and then I'm going to get a quite plain vanilla loan.
So, thirty years, it's going to be a 30-year set rate mortgage, repaired rate, fixed rate, which means the interest rate will not alter. We'll discuss that in a little bit. This 5.5 percent that I am paying on my, on the money that I obtained will not change throughout the thirty years.
Now, this little tax rate that I have here, this is to in fact figure out, what is the tax savings of the interest reduction on my loan? And we'll talk about that in a 2nd, we can overlook it in the meantime. And then these other things that aren't in brown, you shouldn't tinker these if you actually do open up this spreadsheet yourself.
So, it's literally the yearly interest rate, 5.5 percent, divided by 12 and the majority of mortgage loans are compounded on a monthly basis. So, at the end of monthly they see how much money you owe and then they will charge you this much interest on that for the month.
Not known Facts About What Is The Current Interest Rate On Reverse Mortgages
It's really a quite fascinating issue. But for a $500,000 loan, well, a $500,000 home, a $375,000 loan over 30 years at a 5.5 percent rates of interest. My mortgage payment is going to be approximately $2,100. Now, right when I bought the house I wish to present a little bit of vocabulary and we have actually spoken about this in some of the other videos.
And we're presuming that it deserves $500,000. We are presuming 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 versus that possession, that's the home mortgage loan, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your assets and this is all of your financial obligation and if you were basically to sell the assets and settle the financial obligation. If you sell the house you 'd get the title, you can get the cash and then you pay it back to the bank.
However if you were to unwind this transaction immediately after doing it then you would have, you would have a $500,000 home, you 'd settle your $375,000 in debt and you would get in your pocket $125,000, which is exactly what your initial down payment was however this is your equity.