Table of ContentsHow Do Reverse Mortgages Work? Can Be Fun For AnyoneSome Known Incorrect Statements About What Does Ltv Stand For In Mortgages Unknown Facts About What Is A Hud Statement With Mortgages
There are extremely strict laws that were passed in current years that need loan providers do their due diligence to provide you all the options possible to bring your mortgage present or exit homeownership with dignity. reverse mortgages how they work. By comprehending how your home loan works, you can protect your financial investment in your home, and will understand what actions to take if you ever have challenges making the payments.
What I want to finish with this video is explain what a home loan is however I believe most of us have a least a basic sense of it. However even better than that actually go into the numbers and comprehend a bit of what you are in fact doing when you're paying a mortgage, what it's comprised of and just how much of it is interest versus how much of it is in fact paying down the loan.
Let's say that there is a home that I like, let's say that that is the home that I wish to buy. It has a price of, let's say that I require to pay $500,000 to purchase that house, this is the seller of the house right here.
I would like to purchase it. I wish to buy your home. This is me right here. And I have actually been able to save up $125,000. I have actually had the ability to save up $125,000 however I would really like to live 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 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. what are subprime 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 look like, uh, uh, a great guy with a great job who has a great credit ranking.
We need to have that title of your house and once https://www.facebook.com/ChuckMcDowellCEO/ you settle the loan we're going to offer you the title of your 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.
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But the title of the house, the file that says who really owns the house, so this is the home title, this is the title of your home, 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, possibly they have not 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 loan 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 pledge.
Once I settle the loan this promise of the title to the bank will pass away, it'll return to me (how do reverse mortgages work). Which's why it's called a dead pledge or a home loan. And most likely since it originates from old French is the reason why we do not say mort gage. We say, mortgage.
They're really referring to the mortgage, mortgage, the mortgage loan. And what I wish to do in the rest of this video is utilize a little screenshot from a spreadsheet I made to actually show you the math or actually 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 home mortgage calculator, home loan, or actually, even 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 loan calculator, home loan calculator, calculator dot XLSX.
However just go to this URL and then you'll see all of the files there and then you can simply download this file if you wish to have fun with it. However what it does here remains in this kind of dark brown color, these are the assumptions that you could input which you can change these cells in your spreadsheet without breaking the entire spreadsheet.
I'm purchasing a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had saved up, that I 'd spoken about right there. And then the, uh, loan quantity, well, I https://www.businesswire.com/news/home/20190911005618/en/Wesley-Financial-Group-Continues-Record-Breaking-Pace-Timeshare 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 quite plain vanilla loan.
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So, 30 years, it's going to be a 30-year set rate home mortgage, repaired rate, fixed rate, which implies the rate of interest will not alter. We'll talk about that in a little bit. This 5.5 percent that I am paying on my, on the money that I obtained 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 reduction on my loan? And we'll talk about that in a 2nd, we can ignore 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 rates of interest, 5.5 percent, divided by 12 and a lot of mortgage loans are compounded on a monthly basis - what is the current interest rate for mortgages. So, at the end of every month they see how much cash you owe and then they will charge you this much interest on that for the month.
It's actually a pretty intriguing problem. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over thirty years at a 5.5 percent rate of interest. My home mortgage payment is going to be approximately $2,100. Now, right when I purchased your home I wish to present a little bit of vocabulary and we have actually spoken about this in some of the other videos.
And we're assuming that it's worth $500,000. We are assuming that it deserves $500,000. That is an asset. It's a property since it provides you future advantage, the future benefit of being able to live in it. Now, there's a liability against that possession, that's the home loan, that's the $375,000 liability, $375,000 loan or financial obligation.
If this was all of your possessions and this is all of your financial obligation and if you were basically to sell the properties and settle the financial obligation. If you sell your home you 'd get the title, you can get the cash and after that you pay it back to the bank.