Housing equity loans | Housing | Finance & Capital Markets | Khan Academy
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- เผยแพร่เมื่อ 6 ก.ย. 2024
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Simple example of borrowing from equity to fuel consumption. Created by Sal Khan.
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Finance and capital markets on Khan Academy: This old and badly drawn tutorial covers a topic essential to anyone planning to not live in the woods -- your personal balance sheet. Since homes are usually the biggest part of these personal balance sheets, we cover that too.
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"Although I think we're in a recession now."
-Sal in 2008
They call me Chicken Little. They call me Bubble Boy.
Gеt peeеrsоnal lооoоаn hеrе => twitter.com/3ac3041c00204e45d/status/809350192776347648 Hoоousing еquity lоооoаaааns Hоusing Finanсe Cаpitаaаl Markеts Khаn Асаdemу
Now, nine months later, I can honestly say America is in its "Weimar Republic Period." (Those with some knowledge of history will understand the reference.)
Seth Tyrssen, what? The inflation rate is low...
That's only because they juggle it to look that way on paper. In fact, they want even MORE inflation. And unemployment is no better; they simply make the figures lower on paper, when people have run out of their benefits. Take a walk out there on reality street, and you'll see that things are not A-OK as you're being told. People are getting more and more fed up with politician's BS.
You're right. Although I wanted to show how home equity withdrawal made people feel rich and consume more. Education, for the most part, is an investment and, assuming the student is responsible, will generate a return.
Who’s right 💀?, I think you wanted to do a reply
This example would be a bit less confusing if the Liability and Equity were two different numbers. Also, 75% of 1.5 million is 1.125, not 1.075 lol
😂
The example to flip from a Hummer to vacation was excellent . You are a very good teacher Mr. Khan.
Damn it, Sal! Why did you destroy the economy!
Heey 25% off 1.5 million isn't 325k but 375k. An easier way to calculate the 25% is to halve it twice instead of taking 75% off.
Example : 1.5M /2 > 750k /2 > 375k
Having basic ways how to calculate really helps, if you mess one number up the whole balance is wrong.
Am I the only one that'd be afraid to borrow against something who's value is in flux? It seems that you've only really made money once you sell your house for 1.5m and borrowing off equity is just putting you further into debt.
Depends on how you look at it. The real underlying benefit of borrowing off your equity, especially if you use it wisely, is to put it towards your home. By doing this you will increase the value of the home should you be tempted to sell. Yes you take on more debt but depending on how the loan is structured against the property (i.e. first position or second position) when the asset is sold off, the loan will be paid off as well. Unless there is a dramatic decrease in home prices like 2008, an asset like a house generally increases in value. Here in Canada, house prices sky rocketed 2 years ago and now people are in trouble should they want to purchase the home and immediately sell for a profit because prices have steadily decreased since then. Best thing to do then is just sit and hold on to it at that point and wait for the value to increase again, which it inevitably will.
Could you please explain the 325k part, its pretty confusing.
Alright Rocky, the Bank is only willing to loan money to Sal equal to 75% of the value of his house. Just in case Sal can't pay back the loan, the bank can still sell the house and get their money back.
So what is 75% of $1.5m? It is actually $1.125m ($1,125,000), but let's pretend it is $1.075m ($1,075,000) because that is what Sal used in the example.
So the bank would only loan Sal $1,075,000 max, he already has another loan out for $750,000 (the mortgage on the house). So the most the bank will loan to Sal now is $1,075,000 - 750,000 = $325,000.
Hope this helps.
@@pesca844 thank you I don't know why he didn't just use a calculator in the video
@@pesca844 Your a lifesaver. THANKYOU
6:40, I disagree that happiness doesn't show up on balance sheet. If you think about it, every asset you have is contingent on your health and happiness. It's the reserve asset in most people's balance sheets.
Thank you so much! I'm I'm the gifted program and this helps me a lot.
your home is not an asset if it is taking money out of your pocket.... its an asset to the bank but not you.....so the whole 1.5m should not be in the asset column but the appreciation so equity gained works in your favour to be an asset
at the end after he said people were taking out equity loans all the while not having a job, but spending money like crazy, he should said 'and that drove the economy DOWN'
What do you think about HELOCs being used for an accelerated mortgage payment. Taking advantage of daily interest vs monthly interest calculations on the balance.
It would be interesting what the calculations would look like
Something doesn't add up here: the house liabilities equal the house asset in the first box. What about interest? That would make taking out a loan for consumption even worse than you see here.
why does the equity reduce by 100K, shouldn't the inventory (in the asset side itself) increase by 100K and make the BL balanced?
U ARE AWESOME
I am with you
Question:
bank says you can borrow up to 75% of home's worth=$1.25m
but in this case, you can only borrow $375k because of mortgage?
If you did not have mortgage, would you have $1.125m is cash and liability?
Yeah this one did nothing but confuse me more. Got lost at minute 2.
When will the second balance sheet be made of 1.5M after 1st balance sheet?i.e at what time will I know that my house value is worth 1.5 M and I need a new balance sheet.
Great video! A lot of knowledge!
Problem is, why you get mortage to buy house and then can still use that house to get more loan?
Great video
I think this is great.
I gotta get off this 'debt train.' CHOO! CHOO!
thanks for the video
Its never too early to learn about managing your money.
I just don't really understand why you owe the bank 325k when its coming out of your house.
It's hard for people to not spend money when they have a lot of it. So loans like these made people feel rich, when in fact, they were on a high produced by rising real estate. When real estate plummeted, the home owner was left holding a huge loan (in addition to their initial mortgage) after living like a king for a couple years. Did it happen to everyone? No, but even 50% is a disgusting huge amount. Foreclosures reached an all time high.
also known as housing equity withdrawal?
he didnt explain how the equity of $250k tripled to $750k at the beginning and im really curious how it works
It tripled bc the value of their asset went up (aka the value of the house).
nice share
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Hello, what happens if an identical house is sold for 500k. Could the bank ask for money back (75% of 500k) immediately?
Why dont he just sell his 1.5m house?
Why he need to borrow from bank just so he has to pay back again, It extra step and it super risky.
Hihi, have you considered this program called the Intellitus Cash System? (do a google search). My cousin says it gets people oodles of cold hard cash.
Don't like adulting 😩
and i thought the equity was a property left over by the $1.5m minus liability of $750 ...
We r in recession now. 2023
In this scenario could he have refinanced his home at the new market price and use the 500k equity increase towards his original $750k loan? Making it so he only owed 250k?
Nevermind, my dad answered and said that refinancing only changes your interest rate. In order for you to take advantage of the new HIGHER home price and not be a home-equity loan seeking DURMARSE you would want to SELL your house.
Seeking a home equity loan doesn't make you dumb. Using the proceeds from said equity loan on a hummer makes you dumb. If I take a loan for 350K dollars on my houses equity with a 5% interest rate, and know I can make a 7% return on it per year, I net a 2% bonus every year that I continue this transaction. In this example that's a free 7000 dollars I otherwise would not have made this year, which I then grow and compound on in subsequent years.
theres no assets?? wtf
came on...
you have $750k equity and asset and you spend 100k on vacation and you are left with $650k. is this a lesson?
duh...
Home Equity Loan (HEL) = HELL.
So would you still owe that 325?
yeah, you have that cash in hand to use for assets, but still owe it to the bank, which is why equity is lower
Haylie R. Wilson if this is the case, then why didn’t he right that in the liabilities section of the balance sheet?
the equity = 750k that cant be 325k??? wth??
1.5m times 75% should be 1.125 but he writes 1.025. It should be 375k like u expected
Kingdom
The Kingdom of God is the expression of Jehovahs universal sovereignty toward his creatures, or the means used by him to express that sovereignty. This term is used particularly to designate the manifestation of Gods sovereignty through the royal government headed by his Son, Jesus Christ. Kingdom may refer to the rulership of the one anointed as King or to the earthly realm ruled by that heavenly government.
three years later, no dark age happened yet. You sensationalists are so funny
the bubble has burst now! explain that to the people on the bottom of the collapse. not everyone wants to live beside you when it hits the fan. the neighbor will not be able to pay his mortgage. three houses have been empty for 5 years. my neighbors and i have supported the thieves and vandals. greed fueled this mess! you toad!
lol this is explaining simple financial math for class