Table of ContentsAll about Why Do Mortgage Companies Sell MortgagesEverything about How Do Second Mortgages WorkThe Single Strategy To Use For What Are Current Interest Rates On Mortgages
There are extremely https://www.facebook.com/ChuckMcDowellCEO/ rigorous laws that were passed in recent years that need loan providers do their due diligence to provide you all the options possible to bring your home mortgage current or exit homeownership gracefully. how do second mortgages work. By understanding how your home mortgage works, you can safeguard your financial investment in your home, and will know what actions to take if you ever have obstacles making the payments.
What I want to do with this video is explain what a mortgage is however I believe most of us have a least a general sense of it. However even better than that really enter into the numbers and understand a bit of what you are really doing when you're paying a mortgage, what it's made up of and how much of it is interest versus how much of it is in fact paying for the loan.
Let's say that there is a house that I like, let's state that that is the home that I would like to acquire. It has a price tag of, let's state that I require to pay $500,000 to purchase that house, this is the seller of your house right here.
I want to buy it. I want to buy the house. This is me right here. And I have actually had the ability to save up $125,000. I have actually had the ability to conserve up $125,000 but I would really 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 remainder of the amount 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. what are mortgages interest rates today. 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 man with a great task who has an excellent credit ranking.
We need to have that title of the house and when you pay off the loan we're going to offer you the title of your home. 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 your home, the document that says who actually owns the 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, maybe even the seller's bank, possibly they haven't settled 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 mortgage is. This promising of the title for, as the, as the security for the loan, that's what a home mortgage is. And in fact it comes from old French, mort, means dead, dead, and the gage, suggests pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, but it comes from dead pledge.
As soon as I pay off the loan this pledge of the title to the bank will pass away, it'll return to me (what is a fixed rate mortgages). Which's why it's called a dead pledge or a mortgage. And probably due to the fact that it originates from old French is the reason that we Check out here don't state mort gage. 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 reveal you the mathematics or actually 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 loan calculator, home loan, or in fact, even much better, simply go to the download, simply 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 simply 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 want to have fun with it. But what it does here is in this kind 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 buying a $500,000 home. It's a 25 percent deposit, so that's the $125,000 that I had conserved up, that I 'd spoken about right over there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to have to obtain $375,000. It determines it for us and then 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 loan, repaired rate, fixed rate, which means the interest rate will not alter. We'll speak about that in a little bit. This 5.5 percent that I am paying on my, on the cash that I obtained will not change throughout 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 disregard it for now. And then 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 literally the yearly rates of interest, 5.5 percent, divided by 12 and the majority of home loan loans are compounded on a monthly basis - which of the statements below is most correct regarding adjustable rate mortgages?. So, at the end of each month they see how much money you owe and after that they will charge you this much interest on that for the month.
It's actually a pretty interesting problem. But for a $500,000 loan, well, a $500,000 house, a $375,000 loan over thirty years at a 5.5 percent interest rate. My home loan payment is going to be roughly $2,100. Now, right when I purchased your house I desire to present a bit of vocabulary and we have actually talked about this in some of the other videos.
And we're assuming that it deserves $500,000. We are assuming that it deserves $500,000. That is an asset. It's a property since it offers you future benefit, the future benefit of being able to reside in it. Now, there's a liability versus that possession, that's the mortgage loan, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your possessions and this is all of your financial obligation and if you were basically to sell the assets and pay off the financial obligation. If you sell your home you 'd get the title, you can get the cash and then you pay it back to the bank.