An Unbiased View of How Do Biweekly Mortgages Work

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

I want to buy it. I would like to purchase your home. This is me right here. And I have actually had the ability to save up $125,000. I've been able to conserve up $125,000 but I would truly like to reside in that home 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 provide me the remainder of the amount I need for that home, 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. 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 guy with a great job who has a great credit ranking.

We need to have that title of your house and as soon as you pay off the loan we're going to provide you the title of your house. 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.

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But the title of your home, the document that says who really owns the house, 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, perhaps even the seller's bank, possibly they have not paid off 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 loan is. This promising of the title for, as the, as the security for https://www.globenewswire.com/news-release/2020/06/10/2046392/0/en/WESLEY-FINANCIAL-GROUP-RESPONDS-TO-DIAMOND-RESORTS-LAWSUIT.html the loan, that's what a mortgage is. how home mortgages work. And in fact 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, but it comes from dead pledge.

When I pay off the loan this promise of the title to the bank will pass away, it'll return to me. And that's why it's called a dead pledge or a home loan. And most likely due to the fact that it originates from old French is the reason we do not say mort gage. We say, mortgage.

They're truly describing the home mortgage, mortgage, the home loan. And what I want to perform in the rest of this video is utilize a little screenshot from a spreadsheet I made to in fact show you the mathematics or in fact 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, home loan, or actually, even much better, simply go to the download, just 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 mortgage calculator, mortgage calculator, calculator dot XLSX.

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However simply 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 desire to have fun with it. However what it does here is in this sort of dark brown color, these are the presumptions that you could input which you can alter these cells in your spreadsheet without breaking the whole spreadsheet.

I'm purchasing a $500,000 home. It's a 25 percent down payment, so that's the $125,000 that I had conserved 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 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 set rate home mortgage, repaired rate, fixed rate, which means the rates of interest won't alter. We'll talk about that in a little bit. This 5.5 percent that I am paying on my, on the money that I borrowed will not alter over the course of the 30 years.

Now, this little tax rate that I have here, this is to really find out, what is the tax savings of the interest deduction on my loan? And we'll speak about that in a second, we can disregard it for now. And then these other things that aren't in brown, you should not mess with these if you in fact do open up this spreadsheet yourself - how do reverse mortgages really work.

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So, it's actually the annual rates of interest, 5.5 percent, divided by 12 and a lot of 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 then they will charge you this much interest on that for the month.

It's actually a pretty 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 interest rate. My home mortgage payment is going to be roughly $2,100. Now, right when I purchased your house I want to present a little bit of vocabulary and we have actually spoken about this in a few of the other videos.

And we're https://www.inhersight.com/companies/best/industry/financial-services assuming that it's worth $500,000. We are presuming that it deserves $500,000. That is a property. It's an asset because it provides you future advantage, the future benefit of having the ability to reside 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 essentially to offer the possessions and settle the financial obligation. how home mortgages work. If you offer the house you 'd get the title, you can get the cash and then you pay it back to the bank.

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But if you were to unwind this deal immediately after doing it then you would have, you would have a $500,000 home, you 'd settle your $375,000 in debt and you would get in your pocket $125,000, which is precisely what your initial down payment was however this is your equity.

However you might not assume it's consistent and play with the spreadsheet a little bit. But I, what I would, I'm introducing this since as we pay for the financial obligation this number is going to get smaller sized. So, this number is getting smaller, let's state at some point this is just $300,000, then my equity is going to get bigger.

Now, what I have actually done here is, well, actually before I get to the chart, let me really show you how I determine the chart and I do this throughout thirty years and it goes by month. So, so you can envision that there's in fact 360 rows here on the actual spreadsheet and you'll see that if you go and open it up.