How To Use Mortgages Loans In 2020

How To Use Mortgages Loans In 2020

First of all, in order to understand how a mortgage works, you need to know what a mortgage is and in very simple terms, a mortgage is just the way that bank lends you money with a promise of repayment, okay.

That's really what it is on very simple terms but I want to dive into some of the details of really what mortgages and why we even have mortgages.

As you're probably aware a lot, of you watching this right now andI'm gonna speak specifically to the younger generation here for just a moment.

Ifyou're not into adulthood yet or if you're in your early20's maybe, you haven't quite gotten to that to that spot where you're ready tobuy a home so maybe

Why would a bank bewilling to lend you money?

Well banks are in the business of making money, right.

Sowhen a bank lends you money or when they give you a mortgage, you sign papers andyou promise to pay them back but you're not just gonna pay them back the amountthat they lent you, you're actually gonna pay them back interest.

Now interest isthat money, it's the cost of the money that you are borrowing from the bank,right.

Interest rates vary depending on the loan that you're getting, the type ofloan that you're getting which I'll talk a little bit about here as well but thatinterest has to be paid over time so the mortgage lender, the bank, they say,let's just do an example here, they say here's $100,000 because youdon't have $100,000 cash to go out

Theysay here's $100,000 that we will lend you, in order for us to lend this to you,they often will require you to put some of your own skin in

Theywant you put a little bit of down payment down, they call it a down paymentand so you take a certain percentage of money to put down on the

property on aprimary residence or home that you're purchasing for you to live in yourselfthat's probably going to be somewhere between 3% and 5% somewhere right inthat range is very

very typical, sometimes you can get into differentgovernment fund programs where you can do a 0% downprogram or where they basically say, hey, we'll take that risk on ourselvesor we'll

offer up some of that as a government institution to allow you toget into at home easier so some of those things are available at times but you'retypically going to

put in 3% to 5% as a down payment.The bank then says, okay, you're a worthy person to let lend to.

If you're willingto put three to five percent down, we will put the other 95% to 97% intothis property and you can then purchase it, right?

So the bank then says, they thenpay the person that's selling the home that, you know, that $97,000,you put your $3,000 in, the seller has their money, they now

havesold the home to you but in that scenario, the bank is either they own thetitle or they have the title to the home.

The title is the ownership document,right, basically says you own this property so although it says you own itthe bank, they are holding on to that title for a

period of time until you paythat debt off so your goal is over the life of the loan, to pay off that loan,right.

It's to pay down that hundred thousand dollars that you borrowed fromthe bank or that ninety seven thousand dollars that you borrowed from the bankthis is done in an

amortization schedule so there are several different types ofloans that you can get.

I want to talk about two right now just for thepurposes of this video.

You can either get a 30-year loan or a 15-year loan.

Nowthey are exactly as described, exactly as the name says, one last 30 years, theother one lasts 15 years the 30-year loan is very very typical, a lot ofpeople,

most people I would say that go in to buy a home a primary residence oreven an investment property will get a 30-year loan.

What that allows you to dois to pay less of a payment each month but you will end up paying probably alittle bit more over time because of course,

it goes on for 30 years andyou're paying interest on that loan over the entire 30 years A 15-year loan issometimes attractive to individuals because although it means a little bitmore of a payment each month, you pay over a lesser period of time.

How To Use Mortgages Loans In 2020 How To Use Mortgages Loans In 2020 Reviewed by Adpcreation on July 22, 2020 Rating: 5

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