Table of ContentsNot known Incorrect Statements About How Many Mortgages Can You Have How Do Mortgages Work In Monopoly - The FactsAn Unbiased View of Why Reverse Mortgages Are Bad
There are really stringent laws that were passed in current years that need loan providers do their due diligence to offer you all the options possible to bring your home loan existing or exit homeownership gracefully. how reverse mortgages work. By comprehending how your mortgage works, you can protect your financial investment https://www.globenewswire.com/news-release/2020/06/10/2046392/0/en/WESLEY-FINANCIAL-GROUP-RESPONDS-TO-DIAMOND-RESORTS-LAWSUIT.html in your house, and will know what actions to take if you ever have obstacles making the payments.
What I wish to do with this video is describe what a mortgage is but I believe the majority of us have a least a basic sense of it. However even much better than that actually enter into the numbers and comprehend a little bit of what you are in fact doing when you're paying a mortgage, what it's made up of and how much of it is interest versus just how much of it is really paying down the loan.
Let's state that there is a home that I like, let's say that that is your https://www.bintelligence.com/blog/2020/4/20/52-names-leading-the-way-in-customer-service house that I would like to purchase. It has a cost of, let's state that I need to pay $500,000 to buy that home, this is the seller of your home right here.
I want to buy it. I want to buy your home. This is me right here. And I've had the ability to save up $125,000. I've been able to conserve up $125,000 but I would actually like to live 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 lend 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. how do second mortgages work. 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 great person with an excellent job who has a great credit score.
We have to have that title of your home and once you pay off the loan we're going to give 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.
What Does What Is Required Down Payment On Mortgages Do?
But the title of your home, the document that states who really owns your home, so this is the home title, this is the title of your house, house, house title. It will not go to me. It will go to the bank, the house title will go from the seller, possibly even the seller's bank, possibly 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 mortgage is. This vowing 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, indicates dead, dead, and the gage, suggests pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead promise.
Once I pay off the loan this promise of the title to the bank will die, it'll come back to me (reverse mortgages are most useful for elders who). Which's why it's called a dead promise or a mortgage. And probably because it originates from old French is the reason why we do not state mort gage. We say, home mortgage.
They're actually describing the home mortgage, mortgage, the home loan. And what I wish to carry out in the rest of this video is use a little screenshot from a spreadsheet I made to in fact reveal you the math or really 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 loan calculator, home mortgage, or actually, even much better, just go to the download, simply go to the downloads, downloads, uh, folder on your web browser, you'll see a lot of files and it'll be the file called home mortgage calculator, 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 wish to play with it. However what it does here is in this sort of dark brown color, these are the assumptions that you might input and that you can alter these cells in your spreadsheet without breaking the entire spreadsheet.
I'm purchasing a $500,000 house. 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 there. And after that the, uh, loan quantity, well, I have the $125,000, I'm going to need to borrow $375,000. It computes it for us and then I'm going to get a quite plain vanilla loan.
What Does How To Compare Mortgages Do?
So, thirty years, it's going to be a 30-year set rate home mortgage, repaired rate, fixed rate, which implies the rate of interest won't alter. We'll speak about that in a little bit. This 5.5 percent that I am paying on my, on the money that I borrowed will not change throughout the thirty years.
Now, this little tax rate that I have here, this is to actually determine, what is the tax cost savings of the interest reduction on my loan? And we'll discuss that in a 2nd, we can neglect it in the meantime. And then these other things that aren't in brown, you should not mess with these if you in fact do open this spreadsheet yourself.
So, it's literally the yearly rate of interest, 5.5 percent, divided by 12 and most mortgage are compounded on a regular monthly basis - how do second mortgages work. 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 really a pretty fascinating problem. 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 mortgage payment is going to be approximately $2,100. Now, right when I bought the house I desire to present a bit of vocabulary and we've spoken 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 a property. It's an asset because it provides you future advantage, the future advantage of being able to reside 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 assets and this is all of your financial obligation and if you were essentially to sell the properties and settle the financial obligation. If you offer your house you 'd get the title, you can get the money and after that you pay it back to the bank.