Bank, can you provide me the remainder of the quantity I need for that house, which is essentially $375,000 (how does chapter 13 work with mortgages). 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 seem like, uh, uh, a great guy with a good task who has a great credit rating.
We have 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 - how do home mortgages work.
But the title of the home, the file that says who actually owns your house, so this is the house title, this is the title of your home, home, house title. It will not go to me. It will go to the bank, the house title will go from the seller, maybe 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 home loan is. This pledging of the title for, as the, as the security for the loan, that's what a home mortgage is. And really it originates from old French, mort, means dead, dead, and the gage, suggests promise, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead promise.
Once I settle 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 promise or a home mortgage. And probably since it originates from old French is the reason that we do not say mort gage. We state, home loan.
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They're actually describing the home mortgage, home loan, the home loan. And what I wish to do in the rest of this video is use a little screenshot from a spreadsheet I made to really 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 mortgage calculator, mortgage, or really, even better, just go to the download, simply 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 mortgage calculator, calculator dot XLSX.
However just 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 desire to have fun with it. how does chapter 13 work with mortgages. However what it does here remains 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 house. It's a 25 percent deposit, so that's the $125,000 that I had actually saved up, that I 'd talked about right over there. And after that the, uh, loan amount, well, I have the $125,000, I'm going to have to obtain $375,000. It computes it for us and after that I'm going to get a pretty plain vanilla loan.
So, thirty years, it's going to be a 30-year set rate home mortgage, repaired rate, repaired rate, which implies the rates of interest will not alter. We'll talk about that in a bit. This 5.5 percent that I am paying on my, on the cash that I borrowed will not change 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 reduction on my loan? And we'll talk about that in a second, we can overlook it in the meantime. how do mortgages work. And after that these other things that aren't in brown, you should not tinker these if https://diigo.com/0if0p6 you really do open up this spreadsheet yourself.
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So, it's actually the yearly rate of interest, 5.5 percent, divided by 12 and a lot of home loan are intensified on a monthly basis. So, at the end of every 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 really a quite fascinating issue. However 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 mortgage payment is going to be roughly $2,100. Now, right when I purchased your home I desire to introduce a bit of vocabulary and we have actually discussed this in some of the other videos.
And we're presuming that it deserves $500,000. We are assuming that it deserves $500,000. That is a property. It's a possession due to the fact that it provides you future advantage, the future benefit of having the ability to live in it. Now, there's a liability against that asset, that's the home 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 offer the possessions and settle the debt. If you offer the house 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 immediately after doing it then you would have, you would have a $500,000 home, you 'd settle your $375,000 in debt and you would get in your pocket $125,000, which is precisely what your initial down payment was however this is your equity.
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But you could not assume it's continuous and have fun with the spreadsheet a little bit. However I, what I would, I'm presenting this since as we pay for the financial obligation this number is going to get smaller. So, this number is getting smaller, let's state at some point this is only $300,000, then my equity is going to get bigger.
Now, what I've done here is, well, really before I get to the chart, let me really reveal you how I determine the chart and I do this over the course of thirty years and it passes month. So, so you can imagine that there's actually 360 rows here on the real spreadsheet and you'll see that if you go and open it up.
So, on month absolutely no, which I don't show 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 westlake financial services las vegas nv was 5.5 percent divided by 12. 0.46 percent interest on $375,000 is $1,718.75. So, I haven't made any home mortgage payments yet.
So, now prior to 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 hero, I'm not going to default on my mortgage so I make that first home mortgage payment that we determined, that we computed right over here (how to reverse mortgages work).