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Table of ContentsNot known Facts About How Do Reverse Mortgages Work?Some Ideas on What Is Home Equity Conversion Mortgages You Should KnowThe Ultimate Guide To What Is The Interest Rate On Reverse Mortgages

There are very stringent laws that were passed in recent years that require lenders do their due diligence to give you all the choices possible to bring your home loan present or exit homeownership with dignity. which type of interest is calculated on home mortgages. By understanding how your mortgage works, you can secure your financial investment in your home, and will know what actions to take if you ever have obstacles making the payments.

What I desire to finish with this video is describe what a mortgage is however I believe the majority of us have a least a basic sense of it. But even much better than that really go into the numbers and comprehend a little bit of what you are in fact doing when you're paying a mortgage, what it's comprised of and just how much of it is interest versus how much of it is really paying for the loan.

Let's state that there is a house that I like, let's state that that is your home that I want to purchase. It has a price of, let's state that I need to pay $500,000 to buy that home, this is the seller of your home right here.

I would like to buy it. I wish to buy your house. This is me right here. And I have actually had the ability to save up $125,000. I've been able to save up $125,000 however I would actually like to reside in that home 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 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 appear like, uh, uh, a great man with a good job who has an excellent credit score.

We have to have that title of your home and once you pay off the loan we're going to provide 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.

The Definitive Guide for How Do Escrow Accounts Work For Mortgages

However the title of the home, the document that says who actually owns the home, so this is the home title, this is the title of your house, 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 have not 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 home mortgage is. This promising of the title for, as the, as the security for the loan, that's what a mortgage is. And really it comes from old French, mort, indicates dead, dead, and the gage, implies pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead pledge.

Once I pay off the loan this pledge of the title to the bank will die, it'll come back to me (which type of interest is calculated on home mortgages). And that's why it's called a dead pledge or a home mortgage. And probably because it originates from old French is the reason we do not state mort gage. We say, mortgage.

They're really describing the home loan, home loan, the mortgage. And what I want to perform in the rest of this video is https://twitter.com/wesleygroupllc utilize a little screenshot from a spreadsheet I made to in fact show you the mathematics or actually show 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 mortgage calculator, mortgage, or in fact, even much better, simply 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 home loan calculator, mortgage calculator, calculator dot XLSX.

But simply go to this URL and then you'll see all of the files there and then you can simply 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 presumptions that you could input which you can change these cells in your spreadsheet without breaking the whole spreadsheet.

I'm purchasing a $500,000 house. It's a 25 percent down payment, so that's the $125,000 that I had saved up, that I 'd discussed right over there. And then the, uh, loan amount, well, I have the $125,000, I'm going to need to borrow $375,000. It calculates it for us and then I'm going to get a quite plain vanilla loan.

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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 will not alter. We'll talk about 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 determine, what is the tax savings of the interest reduction on my loan? And we'll discuss that in a second, we can overlook it in the meantime. And after that these other things that aren't in brown, you should not tinker these if you in fact do open up this spreadsheet yourself.

So, it's actually the yearly rates of interest, 5.5 percent, divided by 12 and the majority of home mortgage loans are compounded on a monthly basis - what are reverse mortgages. So, at the end of on a monthly basis they see just how much money you owe and after that they will charge you this much interest on that for the month.

It's actually a quite intriguing issue. But for a $500,000 loan, well, a $500,000 home, a $375,000 loan over 30 years at a 5.5 percent interest rate. My mortgage payment is going to be approximately $2,100. Now, right when I purchased your home I want to introduce a bit of vocabulary and we've talked about this in a few of the other videos.

And we're assuming that it deserves $500,000. read more We are presuming that it deserves $500,000. That is an asset. It's a possession because it offers you future advantage, the future advantage of being able to reside in it. Now, there's a liability against that asset, that's the home loan, 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 essentially to sell the assets and settle the financial obligation. If you sell your home you 'd get the title, you can get the money and then you pay it back to the bank.