Let's say that there is a house that I like, let's state that that is the home that I wish to acquire. It has a cost of, let's state that I need to pay $500,000 to purchase that home, this is the seller of the home right here.
I would like to buy it. I want to purchase your house. This is me right here. And I've been able to conserve up $125,000. I have actually had the ability to save up $125,000 however I would really like to live in that house 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 rest of the quantity I require 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 appear like, uh, uh, a good man with a great task who has a great credit score.
We have to have that title of your house and when you pay off the loan we're going to offer you the title of your home. So what's going to take place 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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However the title of the home, the document that states who really owns your house, so this is the house title, this is the title of your house, house, 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, perhaps they have not paid off 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 loan is. This promising of the title for, as the, as the security for the loan, that's what a home loan is. how do buy to let mortgages work uk. And really it comes from old French, mort, means dead, dead, and the gage, indicates pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead pledge.
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 mortgage. And probably since it originates from old French is the reason why we don't state mort gage. We say, mortgage.
They're actually describing the home loan, mortgage, the home loan. And what I wish to perform in the rest of this video is use a little screenshot from a spreadsheet I made to in fact reveal you the math or really show you what your home mortgage 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 loan, or actually, even better, simply go to the download, simply 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 home loan calculator, mortgage calculator, calculator dot XLSX.
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But just 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 play with it. But what it does here is in this kind of dark brown color, these are the assumptions that you might input which you can alter these cells in your spreadsheet without breaking the entire spreadsheet.
I'm buying 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 spoken https://www.inhersight.com/companies/best/reviews/responsiveness?_n=112289636 about right there. And after that the, uh, loan quantity, well, I have the $125,000, I'm going to need to borrow $375,000. It computes it for us and after that I'm going to get a pretty plain vanilla loan.
So, 30 years, it's going to be a 30-year fixed rate mortgage, fixed rate, repaired rate, which suggests the interest rate won't change. We'll speak about that in a little bit. This 5.5 percent that I am paying on my, on the money that I obtained will not alter over the course of the thirty years.
Now, this little tax rate that I have here, this is to actually determine, what is the tax savings of the interest deduction on my loan? And we'll speak about that in a second, we can ignore 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 this spreadsheet yourself - how do home mortgages work.
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So, it's actually the annual rate of interest, 5.5 percent, divided by 12 and most home loan are intensified on a monthly 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 in fact a quite intriguing issue. But for a $500,000 loan, well, a $500,000 house, 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 bought your house I wish to present a bit of vocabulary and we've spoken about this in a few of the other videos.
And we're assuming that it deserves $500,000. We are presuming that it deserves $500,000. That is a wes phone number usa property. It's an asset due to the fact that it provides you future benefit, the future benefit of having the ability to live in it. Now, there's a liability versus that asset, that's the mortgage, that's the $375,000 liability, $375,000 loan or debt.
If this was all of your properties and this is all of your debt and if you were basically to offer the assets and pay off the debt. how does chapter 13 work with mortgages. If you sell your 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 instantly 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 exactly what your original down payment was however this is your equity.
However you might not presume it's consistent and have fun with the spreadsheet a bit. However I, what I would, I'm presenting this since as we pay down the debt this number is going to get smaller sized. So, this number is getting smaller, let's say eventually this is just $300,000, then my equity is going to get larger.
Now, what I have actually done here is, well, actually prior to I get to the chart, let me actually reveal you how I determine the chart and I do this throughout 30 years and it goes by 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.