Table of ContentsSome Known Facts About What Banks Do Reverse Mortgages.The Single Strategy To Use For How Did Subprime Mortgages Contributed To The Financial CrisisThe Best Guide To How Mortgages Interest Is Calculated
There are very strict laws that were passed in recent years that need lending institutions do their due diligence to offer you all the options possible to bring your home loan current or exit homeownership with dignity. reverse mortgages are most useful for elders who. By understanding how your home mortgage works, you can safeguard your 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 discuss what a home mortgage is however I believe the majority of us have a least a general sense of it. But even much better than that really go into the numbers and understand a bit of what you are in fact doing when you're paying a home loan, what it's made up of and just how much of it is interest versus just 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 your house that I wish to acquire. It has a rate tag of, let's say that I need to pay $500,000 to purchase that home, this is the seller of your house right here.
I would like to purchase it. I would like to purchase the house. This is me right here. And I've had the ability to save up $125,000. I've been able to save up $125,000 however I would actually like to reside 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 remainder of the amount I need 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. why are reverse mortgages bad. 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, https://twitter.com/wesleygroupllc uh, uh, a great guy with a good task who has an excellent credit rating.
We have to have that title of your home and as soon as you pay off the loan we're going to provide 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.
The Facts About Which Type Of Organization Does Not Provide Home Mortgages? Uncovered
However the title of the house, the file that says who really owns your home, 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, perhaps they haven't settled 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 mortgage is. This vowing of the title for, as the, as the security for the loan, that's what a home loan is. And actually 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 pledge.
Once I settle the loan this pledge of the title to the bank will die, it'll return to me (what are mortgages interest rates today). And that's why it's called a dead pledge or a mortgage. And probably since it originates from old French is the reason we don't state mort gage. We say, mortgage.
They're actually referring to the mortgage, home mortgage, the mortgage. And what I want to carry out in the rest of this video is use a little screenshot from a spreadsheet I made to actually reveal you the mathematics or in fact 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 actually, even much better, simply go to the download, simply 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 home mortgage calculator, home mortgage calculator, calculator dot XLSX.
But just go to this URL and after that you'll see all of the files there and after that you can just download this file if you wish to have fun with it. But what it does here is in this type of dark brown color, these are the assumptions 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 home. It's a 25 percent down payment, so that's the $125,000 that I had actually conserved up, that I 'd spoken about right over there. And after that the, uh, loan quantity, 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.
The Main Principles Of How Do Second Mortgages Work
So, thirty years, it's going to be a 30-year set rate mortgage, repaired rate, fixed rate, which suggests the rate of interest won't alter. We'll discuss that in a bit. This 5.5 percent that https://apnews.com/Globe%20Newswire/36db734f7e481156db907555647cfd24 I am paying on my, on the money that I borrowed will not alter throughout 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 deduction on my loan? And we'll speak about that in a 2nd, we can ignore it for now. And then these other things that aren't in brown, you should not mess with these if you actually do open this spreadsheet yourself.
So, it's literally the annual interest rate, 5.5 percent, divided by 12 and the majority of mortgage are intensified on a month-to-month basis - what are reverse mortgages. So, at the end of each month they see how much cash you owe and after that they will charge you this much interest on that for the month.
It's actually a quite fascinating issue. But for a $500,000 loan, well, a $500,000 home, a $375,000 loan over thirty years at a 5.5 percent rate of interest. My home loan payment is going to be roughly $2,100. Now, right when I bought your home I desire to introduce a bit of vocabulary and we have actually discussed this in a few of the other videos.
And we're assuming that it's worth $500,000. We are assuming that it's worth $500,000. That is a possession. It's an asset because it gives you future benefit, the future advantage of being able to reside in it. Now, there's a liability versus that asset, that's the home loan, that's the $375,000 liability, $375,000 loan or financial obligation.
If this was all of your assets and this is all of your debt and if you were essentially to sell the properties and settle the financial obligation. If you offer the house you 'd get the title, you can get the cash and then you pay it back to the bank.