Most people have to pay when buying a home need to borrow some of the money. Suppose we have a house here and The purchase price is $ 200,000. My capital is $ 40,000 $ 40,000, this is my total reserve fund, that is, I will make an initial payment, but somewhere to get $ 200,000 I have to borrow the remaining amount. I will get this balance by borrowing $ 160,000. People to buy a house This type of loan is usually called a mortgage loan.
Mortgage. If the mortgage is such a debt if you can't pay it, the person you owe it to becomes the owner of the house. Otherwise, these debts you pay them until insured through the home. When you pay your debt, the house is yours, but somehow you can't afford it, the bank will take the house from you, it is also a hostage-taking process. The parts I will focus on in this video Types of mortgages that you can usually see and at least, about these different types initial concepts will be. In all cases, let's say that I'm in the market to buy this house and I will borrow $ 160,000. To any financial site, or If you look at the major search portals, you will be given mortgage interest rates.
You will see something like this. I put the numbers very simple. We have decimal numbers like 5.25%, 4.18%. I have simplified the figures for clarity. These are the types of mortgages you can see, but if you contact a mortgage agent, there will be many, exotic types of them, but these are the main ones, we will talk about them. I hope you have another also gives an idea of the types. A 30-year fixed mortgage means that yours Your interest rate has been fixed for 30 years, you will pay your debt over the years. In this case let's write it down, let's think about 30 years. 30-year mortgage (collateral). What will happen is that you will be able to pay at a fixed monthly mortgage rate. A small one to show the payment size, now you will understand why I did it. Let's draw a small graphic.
Each of these blocks is your monthly payment; Let's say an amount is, say, $ 2000. Frankly, with a 5% rate for $ 160,000 Exactly exactly 30 years of repayment I didn't think about the mathematical part; but, to make it easier, let's say $ 2000. At this height, let's do it. That's $ 2,000 a month. $ 2000. This is the first month, the second month is $ 2000, will pay and so on. If there are 30 years with 12 months in each this will go until the 360th month; and this will be your last payment. The 360th month is the last payment of 30 years and you should have paid your debt. The first month that is interesting, the first month you borrow from the bank, you borrowed $ 160,000, accordingly Your interest rate payment is quite high Most down payments are in interest. I do the percentages in this purple color. First payment. Oh, it's not purple. Here it is. Most of the first payment will be interest. You pay a little out of your real debt; this is your main payment. Let's say this is the main part at the end of the first month It's $ 2,000, I choose the numbers for ease Let's say it's $ 200 and interest part is also $ 1,800.
I will not work with these assumptions. Your priority is not 160,000 debts, At the end of the first month, which is the main idea here you have to pay 200 of your debt. If the debt at the end of the first month is 160,000, you will not owe 160000-2000, Because 1800 percent of it will be interest. You owe $ 160,000- $ 200, or $ 159,800. Interest rates will be slightly lower next year. It will fall a little lower and yours your stable payment principle of 2000 per month your position will further strengthen. Maybe it's higher next month: Maybe $ 202 The mathematical process continues in this way; they determine the payment and ultimately your payment is a very small amount of interest, Do you pay interest in small amounts and most of the final payment is principal. This is a kind of loan to be used, after the last payment, your debt is paid. It lasts 30 years; It is 30 years old. Fixed 15 years is the same concept, only one instead of paying the debt accordingly for 30 years You will pay for 15 years.
Instead of being 360 months, It will be 180 months for 15 years, therefore your payments for the same debt the sooner you pay your debt will increase. You pay for it in a few months. Somewhere instead of 2,000 a month 2,800 per month for 15 years. You pay faster. 5/1 DID condition, different You will see the types of DID, now I will explain what DID is, but 5/1 is the most known. Let me explain this minute. DID – Variable Mortgage Rate. Variable Mortgage It `s degree. As you can see, in these cases we interest because we used the word fixed rates were stable; whatever the amount of debt you pay let it be the same constant degree for the next period. It has stabilized for 30 years 5% will not change.
We set a fixed rate of 4% for 15 years. In the case of DID, interest rates can vary. If someone is talking about 5/1 DID, they imply "hybrid" (mixed) DID; however, variable mortgage rates the logic behind the balance to be paid is that the amount will vary. It varies according to a certain index. One of the most typical types of DID is hybrid DID; is a hybrid (mixed) type. A hybrid is a mixture of 2 things, or It is a combination of 2 things. Determine the hybrid variable mortgage rate indicates fixed interest rates for the period. Here, it is fixed for 5 years, subsequently this degree 1 time per year may vary. This is exactly what you are told here. This is a variable mortgage rate your payment may look like this, I write simple numbers, just how to show you what it looks like. In this 5/1 case, your 5 years are fixed. Your 5 provinces. The first month will be like this. The second month will look like this. Which is the last month of 5 years Until the 60s, which it will look like that. First, second, this is the 60th month.
This is a period of 5 years. Occurs for 5 years. The idea is similar over 5 years. Part of what you will pay is interest, the rest while in debt repayment will be attributed. By paying more of the debt every month your interest rates you will pay less. Let's grow a little. Less because your remaining debt is reduced 5 years or 60 months, even if you pay interest You have not yet paid your debt in full. Maybe the interest rate here will be higher than that. Although not exactly accurate, your interest your degree will be here; and your debt will be paid from here. For hybrid variable interest rates after 5 years in the bank may change interest rates. The interest rate is one in everyone's attention for a number of reasons is addictive.
These underlying causes increase the percentage. In 1/5 DID, the interest rate starts from 3%. Due to the factors we pay attention to, I will talk about it in detail, interest rates rise sharply. Let's say they suddenly rise, In this case, your payment may increase. Because your payment may increase, The common meaning behind 5/1 is still yours provides for payment in 30 years. They are, so to speak, 30 years old. If you are stuck in this debt, never refinance, ie don't try to pay it off with another debt, 30 years to pay if you are stuck in this debt will receive, but after the first 5 years the amount of interest rate may vary, thus your payment will change. If the interest rate suddenly rises, More interest in 61 months or 6 years you may have to pay. Let's do this part in blue. 6 years, 5/1 to 7 years from DID can not change interest rates until thus, you will pay a fixed amount for 7 years. Then they can change the degree again. Usually the rates are several times a year, in general about how much it can change there are assumptions; but this is a bit risky because you pay within 6-7 years you do not know the amount, especially if interest rates rise.
Now you can ask that 5 years later What determines the interest rate? They usually choose an index type. The most well-known, especially in the United States securities; the state must pay the principal when borrowing money where the interest rate and usually it additional interest comes on it. If the 10-year premium is 2%, bank your loan documents can save for the first 5 years stable period, you have a 10-year treasury interest rate, and you can pay an additional 1%. you start paying a stable 3%, give what happens in the treasury, even if it goes up to 5%, you get 3% for the first 5 years continue to pay, but, in the 6th, let, spell here, let's say it's safe in the 6th treasury interest rate rises to 4%, by agreement, according to your last loan document you will pay the same amount + 1%.
Your mortgage is higher, to pay a 5% rate will be reset. Nevertheless, you can be lucky. Treasury interest rates fall, It can be 1% and your mortgage rate 1% + 1%, that is, it actually drops by 2%. The overall concept can be a bit risky, because you know how the payments will be you have no idea. Often, if we look at probable interest rates, 30-year stable rate 15-year, variable we see that it is higher than the interest rate. This is because there are different types of risk there are, but the bank is changeable minimum for interest rates, For a fixed 30-year interest rate, it takes the most risk. The biggest risk here is your debt is that you do not pay; and this is theirs wanting to see the down payment The reason is that they can buy a house and hope that the home will not lose more value than the down payment.
But in addition, there is the risk of interest rates. Because think about what will happen when the bank lends you money, will give you a stack of money at 5%, and interest rates rise to 6%, 7%, What will happen if it rises to 10%? What about the amount of money the bank borrows the bank has to pay people to borrow if the amount reaches 10%? In this case, your debt will be lost and it will take a long time to recover, therefore they set high rates by preventing such risks.
15 years debt? Less risk, that is, there will be a lower interest rate. 5/1 DID? Lower risk. They are stable for just 5 years, henceforth this percentage annually will play depending on the prevailing interest rate I hope you have this with mortgage rates arouses initial thoughts about, but so If not, this video is your borrowing is not a sufficient source for. Details of these debts It is very important to learn, especially If you buy a lot, from special types of debts variable mortgage interest, interest only or ARM and if you use others..