Table of ContentsEverything about Who Usually Obtains Reverse MortgagesFacts About How Do Mortgages Work In Canada RevealedIndicators on What Are Interest Rates For Mortgages You Need To Know
There are really stringent laws that were passed in recent years that need lenders do their due diligence to offer you all the alternatives possible to bring your home loan existing or exit homeownership gracefully. what are mortgages. By understanding how your home mortgage works, you can secure your investment in your house, and will understand what actions to take if you ever have challenges making the payments.
What I wish to do with this video is describe what a mortgage is however I think the majority of us have a least a general sense of it. However even much better than that really enter into the numbers and understand a little bit of what you are in fact doing when you're paying a home mortgage, what it's made up of and just how much of it is interest versus just how much of it is actually paying down the loan.
Let's say that there is a home that I like, let's say that that is your house that I would like to buy. It has a price of, let's state that I need to pay $500,000 to purchase that home, this is the seller of your house right here.
I want to purchase it. I want to purchase https://www.elkvalleytimes.com/news/business/wesley-financial-group-provides-nearly-million-in-timeshare-debt-relief/article_4be24045-0034-5e07-a6ac-d57ec8d31fcd.html 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 however I would actually like to reside in that home 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 quantity 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. why do banks sell mortgages. 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 good man with a good task who has a great credit rating.
We have to have that title of the home and once you pay off the loan we're going to give you the title of the home. So what's going to take place here is we're going to have the loan is going to go to me, so it's $375,000, $375,000 loan.
Which Credit Report Is Used For Mortgages - An Overview
But the title of the home, the document that says who in fact owns your house, so this is the home title, this is the title of your house, house, home title. It will not go to me. It will go to the bank, the home title will go from the seller, perhaps even the seller's bank, maybe they haven't paid off 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 mortgage is. This vowing of the title for, as the, as the security for the loan, that's what a mortgage is. And really it originates from old French, mort, means dead, dead, and the gage, implies promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it comes from dead pledge.
When I settle the loan this pledge of the title to the bank will pass away, it'll return to me (reverse mortgages how they work). And that's why it's called a dead pledge or a home loan. And probably due to the fact that it comes from old French is the reason that we do not say mort gage. We state, home loan.
They're really referring to the mortgage, home mortgage, the mortgage. And what I wish to carry out in the rest of this video is utilize a little screenshot from a spreadsheet I made to really show you the mathematics or in fact show 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, home loan, or actually, 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 after that you can simply download this file if you wish to play with it. But what it does here is in this sort of dark brown color, these are the presumptions that you could input and that you can alter these cells in your spreadsheet without breaking the entire spreadsheet.
I'm purchasing a $500,000 home. It's a 25 percent down payment, so that's the $125,000 that I had actually saved up, that I 'd talked about right there. And after that the, uh, loan amount, well, I have the $125,000, I'm going to need to obtain $375,000. It determines it for us and after that I'm going to get a pretty plain vanilla loan.
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So, 30 years, it's going to be a 30-year set rate mortgage, fixed rate, repaired rate, which suggests the interest rate won't change. 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 determine, what is the tax cost savings of the interest deduction on my loan? And we'll discuss that in a 2nd, we can overlook it for now. And after that these other things that aren't in brown, you should not tinker these if you actually do open get out of timeshare up this spreadsheet yourself.
So, it's literally the annual rate of interest, 5.5 percent, divided by 12 and a lot of mortgage loans are intensified on a monthly basis - which fico score is used for mortgages. So, at the end of monthly they see just how much money you owe and after that they will charge you this much interest on that for the month.
It's really a quite intriguing problem. But for a $500,000 loan, well, a $500,000 home, a $375,000 loan over thirty years at a 5.5 percent interest rate. My mortgage payment is going to be approximately $2,100. Now, right when I bought your home I wish to introduce a bit of vocabulary and we've spoken about this in a few of the other videos.
And we're presuming that it deserves $500,000. We are presuming that it's worth $500,000. That is a possession. It's an asset since it offers you future benefit, the future benefit of being able to reside 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 financial obligation.
If this was all of your properties and this is all of your debt and if you were basically to offer the assets and settle the financial obligation. If you sell your house you 'd get the title, you can get the cash and after that you pay it back to the bank.