Bank, can you lend me the remainder of the quantity I require for that home, which is basically $375,000 (how adjustable rate 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 look like, uh, uh, a good guy with an excellent job who has an excellent credit rating.
We need to have that title of the house and once you pay off the loan we're going to offer you the title of your house. 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 - how mortgages work.
But the title of the house, the document that says who in fact owns your home, so this is the house 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 Learn more seller, possibly even the seller's bank, maybe 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 home loan is. This promising 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, indicates dead, dead, and the gage, means pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, but it comes from dead promise.
As soon as I settle the loan this promise of the title to the bank will die, it'll return to me. And that's why it's called a dead promise or a home loan. And probably since it originates from old French is the reason we do not say mort gage. We state, home loan.
All About How Do Mortgages Work In Monopoly
They're truly describing the mortgage, home loan, 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 actually 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 home loan calculator, 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 mortgage calculator, mortgage calculator, calculator dot XLSX.
However simply go to this URL and then you'll see all of the files there and after that you can simply download this file if you wish to have fun with it. how do reverse mortgages work. But what it does here is in this kind of dark brown color, these are the presumptions that you could input and that 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 saved up, that I 'd spoken about right over there. And after that the, uh, loan quantity, well, I have the $125,000, I'm going to need to borrow $375,000. It determines it for us and after that I'm going to get a pretty plain vanilla loan.
So, 30 years, it's going to be a 30-year fixed rate mortgage, repaired rate, repaired rate, which indicates the interest rate will not alter. We'll discuss 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 thirty years.
Now, this little tax rate that I have here, this is to actually find out, what is the tax cost savings of the interest deduction on my loan? And we'll speak about that in a second, we can ignore it for now. how do reverse mortgages work in california. And then these other things that aren't in brown, you shouldn't tinker these if you actually do open up this spreadsheet yourself.
7 Easy Facts About How Do Reverse Mortgages Work After Death Shown
So, it's literally the annual interest rate, 5.5 percent, divided by 12 and a lot of home loan are compounded on a month-to-month basis. 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 quite intriguing issue. But 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 mortgage payment is going to be approximately $2,100. Now, right when I bought your house I want to introduce a little bit of vocabulary and we have actually talked about this in a few of the other videos.
And we're assuming that it's worth $500,000. We are assuming that it's worth $500,000. That is a property. It's a property because it gives you future advantage, the future advantage of having the ability to reside in it. Now, there's a liability versus that asset, that's the mortgage, 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 debt and if you were essentially to sell the assets and settle the debt. 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.
However if you were to relax this transaction immediately after doing it then you would have, you would have a $500,000 house, you 'd pay off your $375,000 in debt and you would get in your pocket $125,000, which is exactly what your initial down payment was however this is your equity.
Getting My How Do Biweekly Mortgages Work To Work
But you might not presume it's consistent and have fun with the spreadsheet a little bit. However I, what I https://karanaujlamusic8pvi1.wixsite.com/elliotunjn338/post/h1-styleclearboth-idcontentsection0not-known-facts-about-how-do-condominium-mortgages-workh1 would, I'm introducing this because as we pay for the financial obligation this number is going to get smaller sized. So, this number is getting smaller sized, let's state eventually this is just $300,000, then my equity is going to get larger.
Now, what I've done here is, well, actually prior to I get to the chart, let me really show you how I compute the chart and I do this over the course of thirty years and it passes month. So, so you can picture that there's really 360 rows here on the real spreadsheet and you'll see that if you go and open it up.
So, on month no, which I do not show here, you borrowed $375,000. Now, throughout that month they're going to charge you 0.46 percent interest, remember that 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 loan payments yet.
So, now before I pay any of my payments, instead of owing $375,000 at the end of the very first month I owe $376,718. Now, I'm a hero, I'm not going to default on my home loan so I make that very first home mortgage payment that we determined, that we calculated right over here (how do mortgages work).