Bank, can you provide me the rest of the amount I need for that home, which is basically $375,000 (how do reverse mortgages work?). 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 states, sure, you appear like, uh, uh, a nice guy with an excellent job who has an excellent credit rating.
We need to have that title of your house and once 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 - how do assumable mortgages work.
But the title of your house, the file that states who in fact owns the house, so this is the house title, this is the title of your home, home, home title. It will not go to me. It will go to the bank, the house title will go from the seller, perhaps even the seller's bank, maybe they haven't paid off their home loan, it will go to the bank that I'm obtaining 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 lesley wesley home loan is. And actually it originates from old French, mort, implies dead, dead, and the gage, suggests promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead pledge.
Once I pay off the loan this promise of the title to the bank will pass away, it'll return to me. Which's why it's called a dead pledge or a home loan. And probably since it comes from old French is the reason we do not say mort gage. We state, home loan.
Some Of How Do Arms Work For Mortgages
They're really referring to the home loan, home mortgage, the mortgage loan. And what I wish to perform in the rest of this video is use a little screenshot from a spreadsheet I made to really show you the math or in fact reveal you what your mortgage payment is going to. And you can download, you can download this spreadsheet at Khan Academy, khanacademy.org/downloads, downloads, slash 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, mortgage 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 just download this file if you http://andrewiaj895.cavandoragh.org/h1-style-clear-both-id-content-section-0-the-basic-principles-of-how-does-payment-with-mortgages-work-h1 wish to have fun with it. how mortgages work. But what it does here is in this kind of dark brown color, these are the presumptions that you might input which you can change these cells in your spreadsheet without breaking the entire spreadsheet.
I'm buying a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had conserved up, that I 'd discussed right there. And after that the, uh, loan amount, well, I have the $125,000, I'm going to have to borrow $375,000. It computes 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 mortgage, fixed rate, repaired rate, which indicates the interest rate won't alter. We'll discuss that in a bit. This 5.5 percent that I am paying on my, on the cash 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 find out, what is the tax savings of the interest deduction on my loan? And we'll talk about that in a 2nd, we can disregard it for now. how do canadian mortgages work. And after that these other things that aren't in brown, you shouldn't mess with these if you actually do open up this spreadsheet yourself.
Little Known Facts About How Do Negative Interest Rate Mortgages Work.
So, it's actually the annual interest rate, 5.5 percent, divided by 12 and many mortgage are compounded on a month-to-month basis. So, at the end of on a monthly basis 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 intriguing issue. But for a $500,000 loan, well, a $500,000 home, 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 purchased your house I wish to present a bit of vocabulary and we've talked about this in some of the other videos.
And we're presuming that it's worth $500,000. We are presuming that it's worth $500,000. That is an asset. It's a possession since it gives you future advantage, the future advantage of being able to live in it. Now, there's a liability versus that property, that's the home loan, that's the $375,000 liability, $375,000 loan or financial obligation.
If this was all of your properties 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 offer your home you 'd get the title, you can get the cash and then you pay it back to the bank.
But if you were to unwind this deal right away after doing it then you would have, you would have a $500,000 home, you 'd pay off your $375,000 in financial obligation and you would get in your pocket $125,000, which is precisely what your original down payment was but this is your equity.
What Can Itin Numbers Work For Home Mortgages - Truths
However you might not assume it's continuous and play with the spreadsheet a little bit. However I, what I would, I'm introducing this due to the fact that as we pay down the financial obligation this number is going to get smaller sized. So, this number is getting smaller, let's say at some time this is only $300,000, then my equity is going to get larger.
Now, what I've done here is, well, in fact before I get to the chart, let me actually reveal you how I compute the chart and I do this throughout 30 years and it passes month. So, so you can picture that there's really 360 rows here on the actual spreadsheet and you'll see that if you go and open it up.
So, on month zero, which I do not reveal here, you borrowed $375,000. Now, over the course of that month they're going to charge you 0.46 percent interest, keep in mind that was 5.5 percent divided by 12. 0.46 percent interest on $375,000 is $1,718.75. So, I have not made any mortgage payments yet.
So, now before I pay any of my payments, instead of owing $375,000 at the end of the first month I owe $376,718. Now, I'm a great man, I'm not going to default on my home loan so I make that first home loan payment that we calculated, that we calculated right over here (how do mortgages work in the us).