Bank, can you provide me the rest of the quantity I require for that home, which is basically $375,000 (how do 2nd 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 says, sure, you look like, uh, uh, a good person with a good task who has an excellent credit score.
We have to have that title of your house and when 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 do commercial mortgages work.
However the title of your house, the document that says who actually owns your house, so this is the house title, this is the title of the home, home, home title. It will not go to me. It will go to the bank, the home title will go from the seller, possibly even the seller's bank, maybe they haven't paid off 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 pledging of the title for, as the, as the security for the loan, that's what a home loan 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 promise.
As soon as I settle the loan this pledge of the title to the bank will pass away, it'll return to me. And that's why it's called a dead pledge or a mortgage. And probably since it originates from old French is the factor why we do not state mort gage. We state, home mortgage.
How Do Biweekly Mortgages Work Fundamentals Explained
They're truly describing the home loan, mortgage, the home mortgage loan. And what I want to perform in the rest of this video is utilize a little screenshot from a spreadsheet I made to in fact reveal you the http://manuelgrqp258.raidersfanteamshop.com/h1-style-clear-both-id-content-section-0-what-does-how-much-do-adjustable-rate-mortgages-work-do-h1 math or in fact 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 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, 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 want to play with it. how do mortgages work in canada. However what it does here remains in this type of dark brown color, these are the assumptions that you could input which you can alter 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 conserved up, that I 'd talked about right there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to have to obtain $375,000. It determines it for us and then I'm going to get a quite plain vanilla loan.
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 money that I borrowed will not change throughout the 30 years.
Now, this little tax rate that I have here, this is to actually find out, what is the tax savings of the interest reduction on my loan? And we'll speak about that in a second, we can ignore it for now. how adjustable rate mortgages work. And after that these other things that aren't in brown, you shouldn't tinker these if you in fact do open up this spreadsheet yourself.
The Ultimate Guide To How To Reverse Mortgages Work
So, it's literally the annual rates of interest, 5.5 percent, divided by 12 and many home mortgage loans are compounded on a month-to-month basis. So, at the end of each month 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 intriguing problem. But for a $500,000 loan, well, a $500,000 house, a $375,000 loan over thirty years at a 5.5 percent rates of interest. My home loan payment is going to be roughly $2,100. Now, right when I purchased the home I want to present a little bit of vocabulary and we've discussed this in some 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 due to the fact that it gives you future benefit, the future benefit of having the ability to live 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 assets and this is all of your financial obligation and if you were basically to sell the properties and settle the financial obligation. If you sell your home 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 unwind this deal right away 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 original deposit was however this is your equity.
Everything about How Do Investor Mortgages Work
However you might not presume it's continuous and have fun with the spreadsheet a bit. However I, what I would, I'm introducing this since as we pay down the debt this number is going to get smaller sized. So, this number is getting smaller, let's say at some time this is only $300,000, then my equity is going to get bigger.
Now, what I have actually done here is, well, really prior to I get to the chart, let me in fact show you how I determine the chart and I do this throughout thirty years and it passes month. So, so wesley billing you can picture that there's in fact 360 rows here on the actual spreadsheet and you'll see that if you go and open it up.
So, on month no, which I don't reveal here, you obtained $375,000. Now, throughout that month they're going to charge you 0.46 percent interest, keep in mind 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 mortgage payments yet.
So, now before I pay any of my payments, rather 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 first home mortgage payment that we computed, that we determined right over here (how reverse mortgages work).