Table of ContentsA Biased View of How Many Mortgages Can I HaveWhat Does What Is The Current Interest Rate For Mortgages? Do?What To Know About Mortgages Fundamentals Explained
There are really stringent laws that were passed in current years that need lending institutions do their due diligence to provide you all the alternatives possible to bring your home mortgage existing or exit homeownership gracefully. why do banks sell mortgages. By comprehending how your home loan works, you can safeguard your investment 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 home mortgage is but I think many of us have a least a general sense of it. However even better than that in fact enter into the numbers and understand a little bit of what you are actually doing when you're paying a home mortgage, what it's comprised of and how much of it is interest versus how much of it is in fact paying down the loan.
Let's state that there is a home that I like, let's say that that is your house that I want to purchase. It has a price 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 purchase it. I want to purchase your home. This is me right here. And I have actually had the ability to conserve up $125,000. I've been able to save up $125,000 but I would truly like to live 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 need for that house, which is basically wesley sell $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 nice person with a great task who has a great credit score.
We have to have that title of your house and when you pay off the loan we're going to give 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 your home, the file that states who actually owns the 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 house title will go from the seller, perhaps even the seller's bank, perhaps they have not settled their home loan, 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 promising of the title for, as the, as the security for the loan, that's what a home loan is. And in fact it originates from old French, mort, means dead, dead, and the gage, means 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 come back to me (how many mortgages can i have). And that's why it's called a dead pledge or a mortgage. And probably since it comes from old French is the factor why we do not say mort gage. We state, mortgage.
They're truly describing the mortgage, 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 actually reveal you the math 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 loan, or actually, even better, simply go to the download, simply go to the downloads, downloads, uh, folder on your web internet browser, you'll see a lot of files and it'll be the file called home loan calculator, home mortgage calculator, calculator dot XLSX.
But 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 desire to have fun with it. But what it does here remains in this kind of dark brown color, these are the presumptions that you could input and that you can alter these cells https://www.globenewswire.com/news-release/2020/03/12/1999688/0/en/WESLEY-FINANCIAL-GROUP-SETS-COMPANY-RECORD-FOR-TIMESHARE-CANCELATIONS-IN-FEBRUARY.html in your spreadsheet without breaking the whole spreadsheet.
I'm buying 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 discussed right over 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, thirty years, it's going to be a 30-year fixed rate home loan, repaired rate, repaired rate, which means the rates of interest won't change. We'll discuss that in a little 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 determine, what is the tax cost savings of the interest reduction on my loan? And we'll speak about 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 this spreadsheet yourself.
So, it's literally the annual rate of interest, 5.5 percent, divided by 12 and many mortgage are intensified on a regular monthly basis - what is the current interest rate for mortgages. So, at the end of on a monthly basis they see 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 interesting issue. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over 30 years at a 5.5 percent rate of interest. My home loan payment is going to be approximately $2,100. Now, right when I bought the house I desire to introduce a bit of vocabulary and we've discussed this in a few 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 an asset. It's a possession since it gives you future benefit, the future benefit of having the ability to live in it. Now, there's a liability versus that property, that's the 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 debt and if you were basically to sell the possessions and pay off the financial obligation. If you sell your home you 'd get the title, you can get the cash and then you pay it back to the bank.