Table of ContentsSome Known Details About Reverse Mortgages Are Most Useful For Elders Who Which Type Of Interest Is Calculated On Home Mortgages for BeginnersWhat Does Who Does Usaa Sell Their Mortgages To Do?
What I desire to do with this video is explain what a mortgage is however I believe the majority of us have a least a basic sense of it. But even much better than that really go into the numbers and understand a little bit of what you are really doing when you're paying a home mortgage, what it's made up of and how much of it is interest versus just how much of it is really paying for the loan.
Let's state that there is a home that I like, let's say that that is your home that I want to acquire (reverse mortgages are most useful for elders who). It has a price 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 purchase it. I wish to buy your home. This is me right here - how do second mortgages work. And I have actually been able to conserve up $125,000. what is the current interest rate for mortgages. I have actually been able to conserve 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 provide me the remainder of the amount I need for that home, 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 says, sure, you seem like, uh, uh, a good person with a good job who has a great credit rating.
We have to have that title of the home and when you settle the loan we're going to give 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.
However the title of your house, the file that says who actually owns your house, so this is the home title, this is the title of the house, home, house title. It will not go to me. It will go to the bank, the home title will go from the seller, perhaps even the seller's bank, maybe they have not paid off their home mortgage, it will go to the bank that I'm borrowing from.
So, this is the security right here. That is technically what a home loan is. This pledging of the title for, as the, as the security for the loan, that's what a home loan is. And in fact it comes from old French, mort, implies dead, dead, and the gage, means promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it comes from dead promise.
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Once I pay off the loan this promise of the title to the bank will die, it'll return to me. And that's why it's called a dead promise or a home loan. And most likely because it originates from old French is the reason why we do not state mort gage. which type of credit is usually used for cars. We say, home mortgage.
They're actually referring to the mortgage, home loan, the mortgage. And what I desire to perform in the rest of this video is use a little screenshot from a spreadsheet I made to in fact reveal 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, home mortgage, or in fact, even better, just 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 home loan calculator, home loan calculator, calculator dot XLSX.
However 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 wish to play with it. But what it does here remains in this kind of dark brown color, these are the presumptions that you could 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 saved up, that I 'd discussed right over there. And then the, uh, loan amount, well, I have the $125,000, I'm going to need to borrow $375,000. It determines it for us and then I'm going to get a pretty plain vanilla loan.
So, 30 years, it's going to be a 30-year set rate home loan, fixed rate, repaired rate, which means the rates of interest will not change. We'll talk about that in a 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 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 discuss that in a second, we can ignore it in the meantime. And then these other things that aren't in brown, you shouldn't mess with these if you really do open up this spreadsheet yourself.
So, it's actually the annual rate of interest, 5.5 percent, divided by 12 and the majority of mortgage are intensified on a month-to-month basis. 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.
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It's really a quite fascinating problem. But for a $500,000 loan, well, a $500,000 home, a $375,000 loan over 30 years at a 5.5 percent rate of interest. My mortgage payment is going to be roughly $2,100. Now, right when I purchased your home I wish to present a bit of vocabulary and we've discussed this in some of the other videos.
And we're presuming that it deserves $500,000. We are presuming that it deserves $500,000. That is a possession. It's a possession due to the fact that it gives you future advantage, the future benefit of being able to reside in it. Now, there's a liability against that asset, that's the home mortgage loan, that's the $375,000 liability, $375,000 loan or debt.
If this was all of Click to find out more your possessions and this is all of your financial obligation and if you were essentially to offer the possessions and pay off the financial obligation. If you offer your house you 'd get the title, you can get the cash and then you https://sandirk8qf.doodlekit.com/blog/entry/10552122/some-known-facts-about-how-to-sell-mortgages pay it back to the bank.
But if you were to unwind this transaction right away after doing it then you would have, you would have a $500,000 home, you 'd settle your $375,000 in financial obligation and you would get in your pocket $125,000, which is precisely what your initial down payment was but this is your equity.