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What I wish to make with this video is describe what a mortgage is but I think many of us have a least a basic sense of it. But even better than that in fact go into the numbers and comprehend a bit of what you are really doing when you're paying a home mortgage, what it's made up of and how much of it is interest versus how much of it is in fact paying for the loan.
Let's say that there is a home that I like, let's say that that is your house that I would like to buy (how many mortgages can you have). It has a price of, let's state that I need to pay $500,000 to purchase that house, this is the seller of the house right here.
I want to buy it. I wish to buy your house. This is me right here - which of the statements below is most correct regarding adjustable rate mortgages?. And I have actually been able to conserve up $125,000. how long are mortgages. I have actually been able to conserve up $125,000 however I would actually 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 provide me the remainder of the amount I need for that home, which is basically $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 great person with a good job who has a great credit rating.
We need to have that title of your house and once you settle the loan we're going to provide you the title of the house. 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.
However the title of your home, the document that states who actually owns your home, so this is the home title, this is the title of the house, home, 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 haven't paid off their 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 loan is. This pledging of the title for, as the, as the security for the loan, that's what a mortgage is. And actually it comes from old French, mort, http://knoxcsdv180.yousher.com/the-how-long-are-mortgages-ideas indicates dead, dead, and the gage, suggests promise, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead pledge.
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When I settle the loan this promise of the title to the bank will pass away, it'll return to me. Which's why it's called a dead promise or a home mortgage. And most likely due to the fact that it originates from old French is the reason we don't state mort gage. what is the interest rate for mortgages. We say, home loan.
They're actually referring to the home loan, home loan, the mortgage. And what I wish to carry out in the rest of this video is use a little screenshot from a spreadsheet I made to actually reveal you the math or really reveal you what your home loan 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 much better, simply go to the download, simply 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 mortgage calculator, home loan calculator, calculator dot XLSX.
But just go to this URL and then you'll see all of the files there and then you can just download this file if you want to have fun with it. However what it does here remains in this sort of dark brown color, these are the assumptions that you could input and that you can alter these cells in your spreadsheet without breaking the entire spreadsheet.
I'm buying a $500,000 home. It's a 25 percent rodney wesley down payment, so that's the $125,000 that I had saved up, that I 'd discussed right there. And after that the, uh, loan quantity, well, I have the $125,000, I'm going to need to obtain $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 mortgage, repaired rate, repaired rate, which means the rates of interest will not 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 alter throughout the 30 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 reduction on my loan? And we'll talk about that in a 2nd, we can overlook it in the meantime. And after that these other things that aren't in brown, you shouldn't tinker these if you actually do open up this spreadsheet yourself.
So, it's literally the yearly interest rate, 5.5 percent, divided by 12 and the majority of home loan are compounded on a regular monthly basis. So, at the end of each month they see how much money you owe and then they will charge you this much interest on that for the month.
Fascination About Which Of The Following Statements Is True Regarding Home Mortgages?
It's really a pretty fascinating problem. However for a $500,000 loan, well, a $500,000 home, a $375,000 loan over thirty years at a 5.5 percent interest rate. My home mortgage payment is going to be roughly $2,100. Now, right when I bought the house I wish to present a bit of vocabulary and we have actually discussed this in a few of the other videos.
And we're presuming that it deserves $500,000. We are presuming that it deserves $500,000. That is an asset. It's an asset because it provides you future advantage, the future benefit of being able to reside 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 debt.
If this was all of your possessions and this is all of your financial obligation and if you were essentially to sell the possessions and settle the financial obligation. If you offer the 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 unwind this transaction immediately after doing it then you would have, you would have a $500,000 home, you 'd settle your $375,000 in debt and you would get in your pocket $125,000, which is precisely what your original deposit was however this is your equity.