Table of ContentsThe Basic Principles Of What Is Home Equity Conversion Mortgages The What Is The Current Interest Rate For Commercial Mortgages Statements7 Easy Facts About What Is A Fixed Rate Mortgages Explained
There are extremely rigorous laws that were passed in recent years that need loan providers do their due diligence to give you all the options possible to Click to find out more bring your home loan current or exit homeownership with dignity. how mortgages work. By understanding how your home loan works, you can protect your financial investment in your home, and will understand what actions to take if you ever have difficulties making the payments.
What I wish to finish with this video is explain what a mortgage is however I believe the majority of us have a least a basic sense of it. However even better than that actually enter into the numbers and understand a bit of what you are really doing when you're paying a mortgage, what it's comprised of and just how much of it is interest versus just how much of it is actually paying for the loan.
Let's state that there is a house that I like, let's say that that is your house that I want to purchase. It has a price of, let's state that I need to pay $500,000 to buy that house, this is the seller of your house right here.
I want to buy it. I wish to purchase your home. This is me right here. And I have actually been able to save up $125,000. I have actually been able to conserve up $125,000 however I would really like to live 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 quantity 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 is the current interest rate for commercial 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 nice man with an excellent task who has a good credit score.
We need to have that title 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 happen here is we're going to have the loan is going to go to me, so it's $375,000, $375,000 loan.
The Why Do Banks Sell Mortgages To Other Banks Diaries
However the title of the house, the document that says who in fact owns your home, so this is the house title, this is the title of the house, house, house title. It will not go to me. It will go to the bank, the house title will go from the seller, possibly even the seller's bank, possibly they have not settled their 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 home mortgage is. And in fact it originates from old French, mort, implies dead, dead, and the gage, implies promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead promise.
As soon as I settle the loan this promise of the title to the bank will pass away, it'll return to me (how long are mortgages). Which's why it's called a dead promise or a mortgage. And most likely due to the fact that it originates from old French is the factor why we don't state mort gage. We say, mortgage.
They're truly referring to the home loan, home loan, the mortgage. 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 mathematics 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, mortgage, or in fact, even better, simply go to the download, just go to the downloads, downloads, uh, folder on your web internet browser, you'll see a lot of files and it'll be the file called mortgage calculator, home loan calculator, calculator dot XLSX.
But simply go to this URL and then you'll see all of the files there and after that you can simply download this file if you desire to play with it. But what it does here is in this kind of dark brown color, these are the assumptions that you might input and that you can change these cancel satellite radio cells in your spreadsheet without breaking the whole spreadsheet.
I'm buying a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had actually conserved up, that I 'd talked about right there. And then the, uh, loan amount, well, I have the $125,000, I'm going to need to obtain $375,000. It determines it for us and then I'm going to get a quite plain vanilla loan.
How Do Assumable Mortgages Work Things To Know Before You Buy
So, 30 years, it's going to be a 30-year fixed rate home loan, repaired rate, repaired rate, which indicates the rate of interest will not alter. We'll speak about that in a little bit. This 5.5 percent that I am paying on my, on the money that I borrowed will not alter over the course of the thirty years.
Now, this little tax rate that I have here, this is to in fact determine, what is the tax cost savings of the interest reduction on my loan? And we'll discuss that in a second, we can overlook it for now. And after that these other things that aren't in brown, you should not mess with these if you really do open this spreadsheet yourself.
So, it's literally the yearly rate of interest, 5.5 percent, divided by 12 and most home loan are intensified on a regular monthly basis - non-federal or chartered banks who broker or lend for mortgages must be registered with. So, at the end of every month they see just how much money you owe and then they will charge you this much interest on that for the month.
It's actually a pretty intriguing issue. But for a $500,000 loan, well, a $500,000 house, a $375,000 loan over 30 years at a 5.5 percent rates of interest. My home loan payment is going to be roughly $2,100. Now, right when I bought your home I want to introduce a little bit of vocabulary and we've talked about this in a few of the other videos.
And we're assuming that it deserves $500,000. We are assuming that it's worth $500,000. That is a possession. It's an asset since it provides you future advantage, the future benefit of having the ability to reside in it. Now, there's a liability against that asset, that's the mortgage, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your properties and this is all of your debt and if you were basically to offer the possessions and settle the debt. If you offer your house you 'd get the title, you can get the money and after that you pay it back to the bank.