Table of ContentsWhy Reverse Mortgages Are Bad for BeginnersAn Unbiased View of What Banks Do Reverse MortgagesUnknown Facts About Which Of The Following Statements Is True Regarding Home Mortgages?
There are really rigorous 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 mortgage current or exit homeownership gracefully. which fico score is used for mortgages. By understanding how your home mortgage works, you can safeguard your investment in your home, and will understand what actions to take if you ever have obstacles making the payments.
What I want to finish with this video is describe what a home mortgage is however I think the majority of us have a least a basic sense of it. But even much better than that really enter into the numbers and understand a bit of what you are really doing when you're paying a home loan, what it's comprised of and just how much of it is interest versus how much of it is actually paying for the loan.
Let's say that there is a home that I like, let's state that that is your house that I wish to purchase. It has a cost of, let's state that I timeshare release need to pay $500,000 to buy that house, this is the seller of the house right here.
I wish to purchase it. I wish to buy the home. This is me right here. And I have actually had the ability to save up $125,000. I've had the ability to conserve up $125,000 but I would actually like to reside in that house so I go to a bank, I go to a bank, get a brand-new color for the bank, so that is the bank right there.
Bank, can you lend me the rest of the quantity I require for that home, which is basically $375,000. I'm putting 25 percent down, this right, this right, this wesley financial group lawsuit number right here, that is 25 percent of $500,000. what are points in mortgages. So, I ask the bank, can I have a loan for the balance? Can I have a $375,000 loan? And the bank says, sure, you appear like, uh, uh, a great person with a great task who has an excellent credit score.
We have to have that title of your home and as soon as you pay off the loan we're going to give you the title of your home. 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 Are Points In Mortgages - Truths
But the title of your house, the document that says who in fact owns your home, so this is the home title, this is the title of the house, house, house 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 home mortgage, it will go to the bank that I'm obtaining from.
So, this is the security right here. That is technically what a home mortgage is. This promising of the title for, as the, as the security for the loan, that's what a mortgage is. And in fact it comes from old French, mort, indicates dead, dead, and the gage, indicates 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 promise of the title to the bank will die, it'll come back to me (what is the current interest rate for commercial mortgages?). And that's why it's called a dead promise or a home loan. And most likely due to the fact that it originates from old French is the reason we do not state mort gage. We state, home mortgage.
They're truly referring to the home loan, mortgage, 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 home loan calculator, home mortgage, or really, even much better, simply go to the download, just go to the downloads, downloads, uh, folder on your web browser, you'll see a bunch of files and it'll be the file called home loan calculator, mortgage calculator, calculator dot XLSX.
But simply 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 have fun with it. But what it does here is in this sort of dark brown color, these are the assumptions that you might input and that you can change these cells in your spreadsheet without breaking the entire spreadsheet.
I'm buying a $500,000 home. It's a 25 percent deposit, so that's the $125,000 that I had actually conserved up, that I 'd talked about right over there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to have to borrow $375,000. It computes it for us and after that I'm going to get a pretty plain vanilla loan.
The Facts About What Fico Scores Are Used For Mortgages Revealed
So, thirty years, it's going to be a 30-year set rate home loan, repaired rate, fixed rate, which means 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 money that I borrowed will not alter throughout the 30 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 deduction on my loan? And we'll speak about that in a 2nd, we can overlook it for now. And then these other things that aren't in brown, you shouldn't mess with these if you in fact do open up this spreadsheet yourself.
So, it's actually the yearly rate of interest, 5.5 percent, divided by 12 and the majority of mortgage are compounded on a regular monthly basis - what is the 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 30 years at a 5.5 percent interest rate. My home loan payment is going to be roughly $2,100. Now, right when I bought your home I wish to present a little bit of vocabulary and we have actually discussed this in a few of the other videos.
And we're presuming that it's worth $500,000. We are assuming that it's worth $500,000. That is a property. It's a property due to the fact that it offers 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 mortgage loan, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your properties and this is all of your financial obligation and if you were basically to sell the possessions and pay off the debt. If you offer the house you 'd get the title, you can get the cash and after that you pay it back to the bank.