Table of ContentsNot known Details About What Are Adjustable Rate Mortgages All about What Is Required Down Payment On MortgagesHow To Calculate How Much Extra Principal Payments On Mortgages - Truths
There are very rigorous laws that were passed in recent years that require lenders do their due diligence to provide you all the options possible to bring your home mortgage existing or exit homeownership with dignity. which type of interest is calculated on home mortgages. By understanding how your mortgage works, you can secure your financial investment in your house, and will know what actions to take if you ever have challenges making the payments.
What I wish to do with this video is i want to sell my timeshare with no upfront fees discuss what a home loan is but I think many of us have a least a general sense of it. But even better than that really enter into the numbers and comprehend a bit of what you are actually doing when you're paying a mortgage, what it's made up of and how much of it is interest versus just how much of it is actually paying down the loan.
Let's say that there is a home that I like, let's say that that is the home that I want to purchase. It has a cost of, let's say that I require to pay $500,000 to buy that home, this is the seller of the house right here.
I want to buy it. I want to purchase your home. This is me right here. And I have actually had the ability to save up $125,000. I've had the ability to conserve up $125,000 but I would actually like to live in that home 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 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 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 appear like, uh, uh, a good person with an excellent task who has a great credit ranking.
We need to have that title of your house and when you pay off the loan we're going to provide 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.
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However the title of the home, the document that states who really owns your home, so this is the house title, this is the title of the house, home, 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, maybe they haven't settled their mortgage, 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 vowing of the title for, as the, as the security for the loan, that's what a mortgage is. And in fact it originates from old French, mort, means dead, dead, and the gage, implies promise, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead pledge.
When I pay off the loan this promise of the title to the bank will pass away, it'll return to me (what is the interest rate for mortgages). And that'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 say mort gage. We say, home mortgage.
They're actually referring to the mortgage, home mortgage, the home loan. And what I desire 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 actually 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 home loan 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 bunch of files and it'll be the file called mortgage calculator, home loan calculator, calculator dot XLSX.
However just 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. However what it does here remains in this sort of dark brown color, these are the presumptions that you might input and that you can alter 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 actually conserved up, that I 'd discussed right over there. And after that the, uh, loan amount, well, I have the $125,000, I'm going to need to borrow $375,000. It calculates 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 set rate home mortgage, repaired rate, repaired rate, which suggests the rate of interest will not alter. We'll discuss that in a bit. This 5.5 percent that I am paying on my, on the money that I obtained will not alter over the course of the 30 years.
Now, this little tax rate that I have here, this is to really figure out, what is the tax savings of the interest reduction on my loan? And we'll speak about that in a 2nd, we can neglect it for now. And after that these other things that aren't in brown, you should not mess with these if you in fact do open up this spreadsheet yourself.
So, it's actually the annual rates of interest, 5.5 percent, Informative post divided by 12 and a lot of mortgage are compounded on a month-to-month basis - how long are mortgages. So, at the end of on a monthly basis they see how much cash you owe and then they will charge you this much interest on that for the month.
It's actually a pretty interesting problem. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over thirty years at a 5.5 percent rates of interest. My home mortgage payment is going to be approximately $2,100. Now, right when I purchased the house I wish to introduce a bit of vocabulary and we have actually discussed this in a few of the other videos.
And we're presuming that it's worth $500,000. We are assuming that it deserves $500,000. That is an asset. It's an asset due to the fact that it provides you future benefit, the future advantage of being able to reside in it. Now, there's a liability against that property, that's the mortgage, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your possessions and this is all of your debt and if you were basically to offer the properties and settle the financial obligation. If you offer your home you 'd get the title, you can get the cash and after that you pay it back to the bank.