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What I desire to finish with this video is describe what a mortgage is but I believe the majority of us have a least a general sense of it. However even much better than that in fact go into the numbers and understand a bit of what you are actually doing when you're paying a mortgage, what it's comprised of and just how much of it is interest versus just how much of it is in fact paying down the loan.
Let's state that there is a home that I like, let's state that that is your house that I wish to buy (reverse mortgages are most useful for elders who). It has a cost of, let's state that I need to pay $500,000 to purchase that home, this is the seller of your house right here.
I would like to buy it. I wish to buy the house. This is me right here - reverse mortgages how they work. And I have actually been able to save up $125,000. what is a fixed rate mortgages. I've been able to save up $125,000 but I would actually like to reside http://knoxcsdv180.yousher.com/the-how-long-are-mortgages-ideas 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 require for that house, 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 nice person with a great job who has a good credit ranking.
We need to have that title of your home 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.
But the title of your house, the document that states who really owns your house, so this is the home title, this is the title of your home, 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, possibly they have not settled their home mortgage, it will go to the bank that I'm obtaining from.
So, this is the security right here. That is technically what a mortgage is. This pledging of the title for, as the, as the security for the loan, that's what a home mortgage is. And actually it originates from old French, mort, implies dead, dead, and the gage, implies 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 pay off the loan this promise of the title to the bank will die, it'll return to me. And that's why it's called a dead pledge or a home loan. And most likely since it originates from old French is the reason we do not say mort gage. how many mortgages can you have. We state, home loan.
They're really referring to the home loan, mortgage, the home loan. And what I wish to carry out in the rest of Home page this video is utilize a little screenshot from a spreadsheet I made to in fact reveal you the mathematics or actually reveal 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 mortgage calculator, mortgage, or actually, even much better, just 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, mortgage calculator, calculator dot XLSX.
But simply 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 want to have fun with it. But what it does here is in this sort of dark brown color, these are the assumptions that you might input which you can change 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 conserved up, that I 'd talked about right over there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to need to obtain $375,000. It calculates 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 set rate home mortgage, fixed rate, fixed rate, which indicates the interest rate will not alter. We'll discuss that in a bit. This 5.5 percent that I am paying on my, on the money that I borrowed will not change throughout the thirty years.
Now, this little tax rate that I have here, this is to really determine, what is the tax savings of the interest deduction on my loan? And we'll speak about that in a second, we can overlook it for now. And after that these other things that aren't in brown, you shouldn't tinker these if you really do open up this spreadsheet yourself.
So, it's literally the yearly rate of interest, 5.5 percent, divided by 12 and a lot of mortgage are intensified 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.
Our How To Sell Reverse Mortgages Ideas
It's in fact a quite intriguing problem. However for a $500,000 loan, well, a $500,000 home, a $375,000 loan over thirty years at a 5.5 percent rate of interest. My mortgage payment is going to be roughly $2,100. Now, right when I purchased the house I want to present a little bit of vocabulary and we have actually spoken about this in some 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 due to the fact that it offers you future benefit, the future advantage of having the ability to live in it. Now, there's a liability against that asset, that's the 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 basically to offer the properties and pay off the financial obligation. If you sell your house 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 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, which is precisely what your original down payment was but this is your equity.