Bank, can you provide me the rest of the quantity I need for that home, which is basically $375,000 (how do reverse mortgages work in california). 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 good job who has an excellent credit ranking.
We have to have that title of your house and as soon as you pay off the http://holdennnzk432.bravesites.com/entries/general/the-6-second-trick-for-who-does-usaa-sell-their-mortgages-to loan we're going to give you the title of your home. So what's going to happen 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 second mortgages work in ontario.
But the title of the house, the document that says who actually owns your home, so this is the house title, this is the title of your home, home, home title. It will not go to me. It will go to the bank, the home title will go from the seller, maybe even the seller's bank, possibly they haven't settled their mortgage, it will go to the bank that I'm borrowing from.
So, this is the security right here. That is technically what a mortgage is. This promising 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, implies dead, dead, and the gage, suggests pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead pledge.
Once I settle the loan this pledge of the title to the bank will die, it'll come back to me. And that's why it's called a dead promise or a home mortgage. And probably due to the fact that it originates from old French is the reason we don't state mort gage. We say, home mortgage.
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They're actually describing the home mortgage, mortgage, the mortgage. And what I desire to carry out 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 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 loan calculator, home mortgage, or really, even much better, simply go to the download, just 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.
However just go to this URL and then you'll see all of the files there and then you can simply download this file if you wish to have fun with it. how do arm mortgages work. But what it does here remains in this type 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 purchasing a $500,000 house. It's a 25 percent down payment, so that's the $125,000 that I had actually saved up, that I 'd spoken about right over there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to have to borrow $375,000. It determines it for us and then I'm going to get a pretty plain vanilla loan.
So, 30 years, it's going to be a 30-year fixed rate home loan, repaired rate, repaired rate, which suggests the rates of interest will not change. We'll discuss that in a 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 really find out, what is the tax cost savings of the interest deduction on my loan? And we'll discuss that in a 2nd, we can disregard it for now. how do escrow accounts work for mortgages. And after that these other things that aren't in brown, you shouldn't tinker these if you in fact do open this spreadsheet yourself.
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So, it's literally the yearly rates of interest, 5.5 percent, divided by 12 and many mortgage are intensified on a month-to-month basis. So, at the end of on a monthly basis 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 pretty intriguing problem. But for a $500,000 loan, well, Check out here 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 your home I wish to present a bit of vocabulary and we've spoken about this in some of the other videos.
And we're assuming that it deserves $500,000. We are assuming that it's worth $500,000. That is a possession. It's an asset since it gives you future advantage, the future benefit of having the ability to live in it. Now, there's a liability versus that property, that's the mortgage, 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 sell the possessions and settle the financial obligation. If you offer your house you 'd get the title, you can get the cash and after that you pay it back to the bank.
But if you were to relax this transaction immediately after doing it then you would have, you would have a $500,000 home, you 'd settle your $375,000 in financial obligation and you would get in your pocket $125,000, which is precisely what your initial down payment was however this is your equity.
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But you could not assume it's constant and play with the spreadsheet a bit. However I, what I would, I'm introducing this due to the fact that as we pay for the debt this number is going to get smaller. So, this number is getting smaller sized, let's say eventually this is just $300,000, then my equity is going to get bigger.
Now, what I've done here is, well, actually prior to I get to the chart, let me really show you how I calculate the chart and I do this throughout 30 years and it passes month. So, so you can think of that there's actually 360 rows here on the actual spreadsheet and you'll see that if you go and open it up.
So, on month absolutely no, which I do not show here, you obtained $375,000. Now, over the course of 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 loan payments yet.
So, now prior to 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 mortgage so I make that first home loan payment that we determined, that we calculated right over here (how do mortgages work).