Bank, can you lend me the rest of the quantity I need for that home, which is essentially $375,000 (how do mortgages work in monopoly). 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 good person with a good task who has an excellent credit ranking.
We need to have that title of your home and once you settle the loan we're going to offer you the title of your 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 - how do reverse mortgages work after death.
However the title of the home, the document that states who really owns your home, so this is the home title, this is the title of your home, house, house 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, perhaps they haven't 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 home loan is. This promising of the title for, as the, as the security for the loan, that's what a home mortgage is. And really it originates from old French, mort, means dead, dead, and the gage, indicates promise, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead promise.
As soon as I settle the loan this pledge of the title to the bank will pass away, it'll come back 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 reason we do not state mort gage. We say, mortgage.
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They're really describing the home loan, home mortgage, the mortgage. And what I wish to do in the rest of this video is use a little screenshot from a spreadsheet I made to really 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 mortgage calculator, mortgage, or in fact, 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 bunch of files and it'll be the file called home loan 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 desire to have fun with it. how do commercial mortgages work. However what it does here is in this type of dark brown color, these are the assumptions that you might input and that you can change 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 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 then I'm going to get a pretty plain vanilla loan.
So, thirty years, it's going to be a 30-year set rate home mortgage, fixed rate, fixed rate, which indicates the rates of interest won't 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 alter throughout the 30 years.
Now, this little tax rate that I have here, this is to actually determine, what is the tax cost savings of the interest reduction on my loan? And we'll speak about that in a second, we can neglect it for now. how home mortgages work. And then these other things that aren't in brown, you shouldn't mess with these if you really do open up this spreadsheet yourself.
What Does How Do Interest Only Mortgages Work http://damienznxy687.bearsfanteamshop.com/h1-style-clear-both-id-content-section-0-unknown-facts-about-so-how-do-reverse-mortgages-really-work-h1 Uk Mean?
So, it's literally the yearly interest rate, 5.5 percent, divided by 12 and a lot of mortgage are compounded on a regular monthly basis. So, at the end of every month 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 really a quite intriguing problem. But for a $500,000 loan, well, a $500,000 home, a $375,000 loan over 30 years at a 5.5 percent rate of interest. My home loan payment is going to be roughly $2,100. Now, right when I bought the home I want to introduce a little bit of vocabulary and we've discussed this in a few of the other videos.
And we're assuming that it's worth $500,000. We are assuming that it deserves $500,000. That is an asset. It's an asset since it provides you future advantage, the future advantage of having the ability to live in it. Now, there's a liability versus that possession, that's the mortgage, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your assets and this is all of your debt and cancel espn magazine if you were essentially to offer the possessions and pay off the debt. If you offer your home you 'd get the title, you can get the cash and then you pay it back to the bank.
But if you were to relax this deal immediately 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 down payment was but this is your equity.
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However you might not assume it's constant and have fun with the spreadsheet a little bit. However I, what I would, I'm introducing this because as we pay for the debt this number is going to get smaller. So, this number is getting smaller, let's state at some point this is just $300,000, then my equity is going to get larger.
Now, what I've done here is, well, actually before I get to the chart, let me in fact show you how I calculate the chart and I do this throughout thirty years and it passes month. So, so you can think of that there's in fact 360 rows here on the real spreadsheet and you'll see that if you go and open it up.
So, on month zero, which I do not reveal 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 have not made any 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 mortgage payment that we calculated, that we computed right over here (how reverse mortgages work).