Table of ContentsHow Why Are Mortgages So Expensive can Save You Time, Stress, and Money.Facts About How Much Can I Borrow Mortgages Revealed10 Simple Techniques For What Do Mortgages Lenders Look At
What I wish to make with this video is describe what a mortgage is but I think the majority of us have a least a basic sense of it. However even better than that in fact enter into the numbers and understand a little 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 really paying for the loan.
Let's say that there is a house that I like, let's state that that is the home that I want to purchase (what is the current interest rate for mortgages). It has a cost of, let's state that I need to pay $500,000 to buy that house, this is the seller of your house right here.
I wish to buy it. I want to buy the home. This is me right here - what are mortgages interest rates today. And I have actually had the ability to conserve up $125,000. which of the statements below is most correct regarding adjustable rate mortgages?. I've had the ability to save up $125,000 however I would actually like to live in that home 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 remainder of the amount I need for that home, 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. 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 good man with an excellent job who has a good credit rating.
We have to have that title of the home and once you settle the loan we're going to provide you the title of your home. So what's going to occur here is we're going to have the loan is going to go to me, so it's $375,000, $375,000 loan.
But the title of the home, the file that states who in fact owns your house, 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, maybe they haven't 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 pledging 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, implies dead, dead, and the gage, indicates pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead pledge.
The Only Guide to What Is The Current Index Rate For Mortgages
When I settle the loan this pledge of the title to the bank will die, it'll return to me. Which's why it's called a dead promise or a mortgage. And probably because it originates from old French is the reason that we don't state mort gage. which type of interest is calculated on home mortgages. We say, mortgage.
They're actually describing the mortgage, home mortgage, the home mortgage loan. And what I desire to do in the rest of this video is use a little screenshot from a spreadsheet I made to actually reveal you the mathematics 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, Go to this site downloads, slash mortgage calculator, mortgage, or actually, even better, just go to the download, just 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 mortgage calculator, mortgage calculator, calculator dot XLSX.
But 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 desire to have fun with it. However what it does here remains in this kind of dark brown color, these are the presumptions that you might input and that you can change these cells in your spreadsheet without breaking the whole spreadsheet.
I'm purchasing a $500,000 house. It's a 25 percent deposit, 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 borrow $375,000. It computes it for us and after that I'm going to get a quite plain vanilla loan.
So, 30 years, it's going to be a 30-year fixed rate home loan, fixed rate, fixed rate, which means the rate 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 money that I obtained will not change over the course of the thirty years.
Now, this little tax rate that I have here, this is to actually figure out, what is the tax cost savings of the interest reduction on my loan? And we'll talk about that in a second, we can ignore it in the meantime. And after that 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 annual rates of interest, 5.5 percent, divided by 12 and most mortgage are intensified on a monthly basis. So, at the end of every month they see how much cash you owe and after that they will charge you this much interest on that for the month.
Some Known Questions About How Adjustable Rate Mortgages Work.
It's in fact a quite interesting problem. However for a $500,000 loan, well, a $500,000 house, a $375,000 loan over thirty years at a 5.5 percent interest rate. My home loan payment is going to be approximately $2,100. Now, right when I purchased your house I wish to introduce a little bit of vocabulary and we've spoken about this in a few of the other videos.
And we're assuming that it's worth $500,000. We are presuming that it deserves $500,000. That is a property. It's a property since it gives you future benefit, the future advantage of having the ability to reside in it. Now, there's a liability against that property, 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 basically to sell the possessions and pay off the debt. If you sell your house you 'd get the title, you can get the cash and then you pay it back to the bank.
However if you were to relax this deal right away after doing it then you would have, you would have a $500,000 house, you 'd settle your $375,000 in financial obligation and you would get in your pocket $125,000, https://www.evernote.com/shard/s540/sh/e3c13dc1-a9d0-9222-1bb1-c962c520b496/ef51da0616757c77fb95a1fae5bf79a8 which is exactly what your original deposit was however this is your equity.