Timestamps! 0:25 What is an interest rate anyway? 1:05 APR vs interest rate 2:05 Fixed vs ARM 2:58 The interest rate doesn't tell you this 3:48 What determines your rate? 6:29 Points vs credits 8:06 How to calculate interest payments 8:36 How your payment is made 8:49 How your interest payment changes 9:40 30 yr vs 15 yr loan 11:12 Should you pay points?
You explained so simply what I couldn't figure out in the first 60 seconds of the video. The entire video is very informative and you explain everything so well. I typically never leave comments but I really wanted to thank you for making this.
Your videos are so helpful. I’m 25 and hoping to to buy a house by the time I’m 30 so learning the ins and outs of what to expect is really helpful for a Type A person like me. Unfortunately, I live in CA where a house costs at least $500k-$600k and on a $55k salary that’s somewhat discouraging. But these videos kind of motivate me to at least try to make my way to a 20% down payment. Between you and Dave Ramsey I’m sure I can figure something out. Thanks for the content!
Thanks Kyle. Question- I have around 250k on my principle property and an investment on the side. If I was to go to the bank and put a lump sum payment on my principle property say $50k, would I have grounds to negotiate the interest rate based on my risk reducing somewhat? Thanks
I want to buy so badly, but hearing numbers like that is so depressing. You could buy another house with what you pay interest during the left of the loan. My alternative would be to buy a house cash, but I would be saving for a lifetime for it. Can you do a video on the difference between purchasing a condo and a single family home if there are differences? I’ve been leaning towards buying a condo or a townhouse.
It can definitely be a bit disappointing. On the flip side, renting is no better :) The best strategy would be to take a mortgage and pay it down as aggressively as possible, almost as if you didn't have a house yet and were saving up cash for it. I sure can, I'll add it to the list! I do have a video on HOAs that might be helpful: HOA Pros And Cons - Is An HOA Worth It? th-cam.com/video/35LncNveCRI/w-d-xo.html
Hey, question. I applied for a home loan and the lender went over monthly payment (est. 1700), approved loan amount (320k), down payment & closing costs (est 23k), Credit score (801), but mentioned nothing about interest rate. I was lost. When I asked her, she said interest rate is not important as it changes over time & will change at closing. But if I would like to know it would be around 2.7 or 2.8 percent and its not much of difference if it was less, my monthly payment will go down only about $19. I was a bit confused as I thought whether it was 2.8 or 2.4 would be something to tell me as it matters. It sounds like a good conventional loan, but I'm still iffy. Is this accurate? Should I shop around?
The lender has to provide you a loan estimate. This is required by law. Only "going over the numbers" like that is not acceptable. The LE will contain all the information you need to know about the cost of your mortgage.
Thanks for this video! I only have one question though. You only mentioned how much interest you get to pay every year (and you broke that down to monthly cost) but you did not mention how the original principal get paid how? How is that factored in to yearly (and monthly payment) ?
Hi Finlay! I generally don't use annual calculations because every month your principal decreases. So, for the $100,000 @4% example, an amortization schedule makes the monthly payment $477/mo. On the first month, the interest is $100,000*.04*(1/12) = $333.33. It's the simple interest formula, where time is in years and you divide by 12 because we're talking about monthly payments. So, of the $477/mo you pay, $333.33 goes to the bank as interest, and the remaining $477 - $333.33 = $143.67 goes to lower the principal, making the amount now $100,000 - $143.67 = $99,856.33. Not a whole lot, but it's a start! Second month, same math: $99,856.33*.04*(1/12) = $332.85
The example this guy used in his video is not the right way to demonstrate how much interest you'll pay for a mortgage in a given year. His example shows how much interest you'll pay for an interest only facility, a structure that is more typical in commercial lending than mortgage lending. Although construction lending does include i/o terms.
Can you please explain how a lower interest rate could potentially cost more than a loan with a higher interest ratwover time? The fees are one time fees, correct?So I'm not sure how that can impact the loan for the long term. Thanks
why are my numbers not matching with yours? 200,000 at 4% for 30 years - > (200,000 * 0.04 * 30 ) + 200,000 = 440,000 but you got something like 465k what am I doing wrong?
Great point! Inflation can definitely impact the real cost of interest over time and it’s worth considering when choosing between a 30-year and 15-year mortgage. Thanks for watching!
There is an assumption in your comment that 2 people with 2 different incomes would have the same loan just with different terms. That should not be the case.
@@_ShaDynasty Unless it's to their benefit for various tax write-offs. For the very wealthy, there are ways to pay much less in taxes when you are in debt, which makes their total personal bottom line more profitable because they get tax breaks that we don't get. But you need to be very wealthy to play that game without screwing yourself up.
Jason, this is true. Depends on the factors in your mortgage, by the time you payoff. Today interest rate your total interest payments for the life of your mortgage it may be around 70% to 100% of your loan amount. Also mortgage buyers pay more money in closing, not only charged by the lenders also by the government.
Timestamps!
0:25 What is an interest rate anyway?
1:05 APR vs interest rate
2:05 Fixed vs ARM
2:58 The interest rate doesn't tell you this
3:48 What determines your rate?
6:29 Points vs credits
8:06 How to calculate interest payments
8:36 How your payment is made
8:49 How your interest payment changes
9:40 30 yr vs 15 yr loan
11:12 Should you pay points?
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You explained so simply what I couldn't figure out in the first 60 seconds of the video. The entire video is very informative and you explain everything so well. I typically never leave comments but I really wanted to thank you for making this.
This is sweet, thank you!
Thank you for this breakdown. So educational I learned a lot!
You're welcome! I'm glad to hear and thanks for watching!
I love how detailed and understandable this video is. 🙏🙏
Thank you!
Thank you so much I am trying to pay down my mortgage as fast as possible and your explanation helped me understand how the interest is calculated.
Glad it was helpful!
Your videos are so helpful. I’m 25 and hoping to to buy a house by the time I’m 30 so learning the ins and outs of what to expect is really helpful for a Type A person like me. Unfortunately, I live in CA where a house costs at least $500k-$600k and on a $55k salary that’s somewhat discouraging. But these videos kind of motivate me to at least try to make my way to a 20% down payment. Between you and Dave Ramsey I’m sure I can figure something out. Thanks for the content!
Hey Andrea! I made a personal video reply for you: m.bixel1.net/tsiuxe
Thanks Kyle.
Question- I have around 250k on my principle property and an investment on the side. If I was to go to the bank and put a lump sum payment on my principle property say $50k, would I have grounds to negotiate the interest rate based on my risk reducing somewhat? Thanks
Hi! Unfortunately no. The note has already been “set in stone”. To change the rate, you’d need a refinance
Who owns the houses that get sold on mortgage terms?
I'm not sure if I'm understanding
Excellent and clear explanation. Thanks!!!❤️
My pleasure!
I really do appreciate all the information thank you.
You are so welcome!
This guy is awesome, great information thank you 🙏
Thanks so much! :)
I want to buy so badly, but hearing numbers like that is so depressing. You could buy another house with what you pay interest during the left of the loan. My alternative would be to buy a house cash, but I would be saving for a lifetime for it. Can you do a video on the difference between purchasing a condo and a single family home if there are differences? I’ve been leaning towards buying a condo or a townhouse.
It can definitely be a bit disappointing. On the flip side, renting is no better :)
The best strategy would be to take a mortgage and pay it down as aggressively as possible, almost as if you didn't have a house yet and were saving up cash for it.
I sure can, I'll add it to the list! I do have a video on HOAs that might be helpful:
HOA Pros And Cons - Is An HOA Worth It?
th-cam.com/video/35LncNveCRI/w-d-xo.html
Hey, question. I applied for a home loan and the lender went over monthly payment (est. 1700), approved loan amount (320k), down payment & closing costs (est 23k), Credit score (801), but mentioned nothing about interest rate. I was lost. When I asked her, she said interest rate is not important as it changes over time & will change at closing. But if I would like to know it would be around 2.7 or 2.8 percent and its not much of difference if it was less, my monthly payment will go down only about $19. I was a bit confused as I thought whether it was 2.8 or 2.4 would be something to tell me as it matters. It sounds like a good conventional loan, but I'm still iffy. Is this accurate? Should I shop around?
Hmmmm, yeah I'd work with another lender.
The lender has to provide you a loan estimate. This is required by law. Only "going over the numbers" like that is not acceptable. The LE will contain all the information you need to know about the cost of your mortgage.
Thanks for this video! I only have one question though. You only mentioned how much interest you get to pay every year (and you broke that down to monthly cost) but you did not mention how the original principal get paid how? How is that factored in to yearly (and monthly payment) ?
Principal is paid based on an amortization table, the math is a bit more difficult to do by hand
Hi Finlay! I generally don't use annual calculations because every month your principal decreases. So, for the $100,000 @4% example, an amortization schedule makes the monthly payment $477/mo. On the first month, the interest is $100,000*.04*(1/12) = $333.33. It's the simple interest formula, where time is in years and you divide by 12 because we're talking about monthly payments.
So, of the $477/mo you pay, $333.33 goes to the bank as interest, and the remaining $477 - $333.33 = $143.67 goes to lower the principal, making the amount now $100,000 - $143.67 = $99,856.33. Not a whole lot, but it's a start!
Second month, same math: $99,856.33*.04*(1/12) = $332.85
The example this guy used in his video is not the right way to demonstrate how much interest you'll pay for a mortgage in a given year. His example shows how much interest you'll pay for an interest only facility, a structure that is more typical in commercial lending than mortgage lending. Although construction lending does include i/o terms.
Completely unrelated comment. What brand are your glasses? Also, great content! Keep the videos coming.
Thanks so much!! Gerret Leight Winward
@@WinTheHouseYouLove Appreciate it!
Excellent videos. Keep up the good work.
Thanks, will do!
Can you please explain how a lower interest rate could potentially cost more than a loan with a higher interest ratwover time? The fees are one time fees, correct?So I'm not sure how that can impact the loan for the long term. Thanks
Here's a personal video reply to clear things up: m.bixel1.net/ozix8b
Win The House You Love so does that only apply to FHA loans?
Win The House You Love thank you 🙏
How would one "buy out" an interest rate?
Here's a good video: th-cam.com/video/jvZSoYnUa2A/w-d-xo.html
why are my numbers not matching with yours?
200,000 at 4% for 30 years - > (200,000 * 0.04 * 30 ) + 200,000 = 440,000 but you got something like 465k what am I doing wrong?
Can you point me to a timestamp in the video where I mention those numbers? I'm not sure what you're asking about.
@@WinTheHouseYouLove 9:50 thanks for quick reply
Nobody mentions inflation when they are calculating 30 yr vs 15 yr. I think it should be a consideration.
Great point! Inflation can definitely impact the real cost of interest over time and it’s worth considering when choosing between a 30-year and 15-year mortgage. Thanks for watching!
9:45 it's crazy to realize that poor people need to pay about 3x more for a home than rich people .
There is an assumption in your comment that 2 people with 2 different incomes would have the same loan just with different terms. That should not be the case.
@@WinTheHouseYouLove no, rich people pay cash
@@_ShaDynasty Unless it's to their benefit for various tax write-offs. For the very wealthy, there are ways to pay much less in taxes when you are in debt, which makes their total personal bottom line more profitable because they get tax breaks that we don't get. But you need to be very wealthy to play that game without screwing yourself up.
Jason, this is true. Depends on the factors in your mortgage, by the time you payoff. Today interest rate your total interest payments for the life of your mortgage it may be around 70% to 100% of your loan amount. Also mortgage buyers pay more money in closing, not only charged by the lenders also by the government.