Table of ContentsSome Known Details About Which Fico Score Is Used For Mortgages 7 Easy Facts About Why Do Banks Sell Mortgages ExplainedSee This Report on Which Of The Following Is Not A Guarantor Of Federally Insured Mortgages?
There are extremely stringent laws that were passed in current years that require lenders do their due diligence to provide you all the choices possible to bring your home mortgage current or exit homeownership gracefully. how reverse mortgages work. By understanding how your home mortgage works, you can safeguard your investment in your house, and will understand what actions to take if you ever have obstacles making the payments.
What I wish to do with this video is describe what a mortgage is however I believe the majority of us have a least a general sense of it. However even much better than that in fact enter into the numbers and understand a bit of what you are actually doing when you're paying a home mortgage, what it's comprised of and just how much of it is interest versus just 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 the home that I would like to purchase. It has a price of, let's say that I require to pay $500,000 to purchase that house, this is the seller of your house right here.
I wish to buy it. I wish to buy the home. This is me right here. And I've been able to conserve up $125,000. I have actually been able to conserve up $125,000 however I would truly like to live in that house so I go to a bank, I go to a bank, get a 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 house, 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. 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 says, sure, you look like, uh, uh, a good man with an excellent job who has a good credit score.
We have to have that title of your home and once you pay off the loan we're going to offer 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.
Little Known Facts About How Do Mortgages Payments Work.
But the title of the home, the file that says who in fact owns the home, so this is the home 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 home loan is. And really it comes from old French, mort, suggests dead, dead, and the gage, means pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead promise.
When I settle the loan this promise of the title to the bank will die, it'll return to me (what does it mean when economists say that home buyers are "underwater" on their mortgages?). Which's why it's called a dead promise or a home loan. And probably since it originates from old French is the reason we don't say mort gage. We say, home mortgage.
They're truly describing the mortgage, home loan, 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 in fact reveal you the mathematics or really show you what your 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 actually, even much 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 mortgage 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 then you can just download this file if you wish to have fun with it. But what it does here remains in this type of dark brown color, these are the presumptions that you could input and that you can alter these cells in your spreadsheet without breaking the entire spreadsheet.
I'm purchasing a $500,000 home. It's a 25 percent deposit, so that's the $125,000 that I had actually saved up, that I 'd spoken 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 computes it for us and then I'm going to get a quite plain vanilla loan.
What Does How Do Lenders Make Money On Reverse Mortgages Mean?
So, 30 years, it's going to be a 30-year fixed rate mortgage, fixed rate, fixed rate, which implies the rate of interest won't alter. We'll discuss that in a bit. This 5.5 percent that I am paying on my, on the cash that I obtained will not alter over the course of the 30 years.
Now, this little tax rate that I have here, this is to actually figure out, what is the tax savings of the interest reduction on my loan? And we'll speak about that in a second, we can disregard it for now. And after that these other things that aren't in brown, you should not tinker these if you in fact do open this spreadsheet yourself.
So, it's actually the annual interest rate, 5.5 percent, divided by 12 and a lot of mortgage are intensified on a month-to-month basis - what are mortgages interest rates today. So, at the end of on a monthly basis they see just how much cash you owe and after that they will charge you this much interest on that for the month.
It's really a pretty fascinating problem. Additional resources 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 mortgage payment is going to be roughly $2,100. Now, right when I bought your house I https://www.bbb.org/us/tn/franklin/profile/timeshare-advocates/wesley-financial-group-llc-0573-37070239 wish to introduce a little bit of vocabulary and we have actually spoken about 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 a property. It's a property because it provides you future advantage, the future advantage of being able to reside 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 possessions and this is all of your debt and if you were essentially to offer the properties and pay off the debt. If you sell your house you 'd get the title, you can get the money and then you pay it back to the bank.