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Mutual Funds Videos 165 videos

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Finance: What is a Mortgage? 345 Views


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What is a mortgage? A mortgage is a loan on property. Obviously not many individuals, or companies for that matter, can or want to pay cash for their homes or business buildings, so mortgages exist. They act like other loans, in that banks charge interest on them. A typical home mortgage lasts 30 years and can have a wide range of interest rates depending on the owner’s ability to pay back the loan, as is standard in any loan. If someone owns a house or building, they almost always have a mortgage.

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Transcript

00:00

Finance allah shmoop shmoop What is a mortgage Well people

00:07

a mortgage is just dead it's alone but one with

00:10

special tax treatment For most people simply put Any interest

00:15

you pay on a mortgage to buy a home is

00:18

tax deductible Morty morton's inputs down a hundred thousand bucks

00:25

to buy a home that costs four hundred big ones

00:29

his mortgages three hundred grand at five percent interest per

00:33

year So that's fifteen thousand dollars a year he pays

00:36

to rent the money from the bank which he uses

00:39

to buy his dream home with the loop de loop

00:42

waterslide Morty earns one hundred grand a year and pays

00:44

tax on his last fifteen thousand of earnings soas faras

00:48

The irs is concerned since morty can deduct his fifteen

00:52

thousand dollars in interest against his earnings he does not

00:56

in fact earn taxable wages of one hundred grand annually

01:00

Instead he earns taxable wages of eighty five thousand dollars

01:05

a year Essentially with government is doing is sharing in

01:08

some of the cost of renting the money Taub i'm

01:11

ortiz home well why would the u s government be

01:13

so charitable Well because home ownership has been integral part

01:17

of the american dream since the u s of a

01:20

i po'ed in seventeen seventy six easy access to mortgages

01:25

and then home buying can be a hugely beneficial asset

01:29

In the vast majority of cases homes create family stability

01:32

a store of wealth and tax dollars for local schools

01:36

in the form of real estate taxes So don't feel

01:39

bad about splurging on that water slide there Morty Just 00:01:42.93 --> [endTime] remember you're doing it for the kids Hello

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