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How Real Estate Interest Rates Are Determined | Interest And Interest Rate In Real Estate Explained

How Real Estate Interest Rates Are Determined | Interest And Interest Rate In Real Estate Explained

How Real Estate Interest Rates Are Determined | Interest And Interest Rate In Real Estate Explained For more content and in-depth training, check out my COURSES at https://trevorcalton.com/. For help with COMMERCIAL LOANS and REAL ESTATE INVESTING, visit Evergreen Capital Advisors at https://www.evergreen.llc --- Determinants of Mortgage Interest Rates Real estate interest rates are set using a compilation of: + Real rate (compensation to lender) + Inflation + Risk Premiums --------------------------- = Nominal Interest Rate (named rate or APR) Note that this is the APR (annual percentage rate), and not the APY which is the true cost of borrowing after compounding, loan fees, etc. Real Estate Finance & Investments textbook by Brueggeman and Fisher or by Peter Linneman --- For more content and in-depth training, check out my COURSES at https://trevorcalton.com/. For help with COMMERCIAL LOANS and REAL ESTATE INVESTING, visit Evergreen Capital Advisors at https://www.evergreen.llc --- #investing #realestate #TrevorCalton #mortgage #realestatefinance #interest #finance #loans #lending #realestateinvesting #brueggeman #fisher #linneman OTHER VIDEOS: Negative Leverage is HERE! - Learn How to Optimize Your Real Estate Returns When Interest Rates Rise: https://youtu.be/8QplNAC9RPI "I Inherited Real Estate and Don't Know Where to Start!" - Live Q&A (Edited):https://youtu.be/MG6qJQBJMmE Turn Housemates Into Your First Real Estate Investment! What You Need to Know Before House Hacking!:https://youtu.be/1VZhMKZ6Gbk OTHER QUERIES: how real estate interest rates are determined interest and interest rate in real estate explained real estate interest rates explained interest and interest rate in real estate how real estate interest rates works mortgage rates interest rates real estate determine real estate interest rates inflation interest rate hike real estate interest rates interest and interest rate finance real estate finance finance tutorial investing for beginners investment interest debt ___________________ SUBSCRIBE PLEASE: https://www.youtube.com/channel/UCw0j049AchMAisbkhVhj6VA ____________________
What is Loan Amortization? All Four Types of Loan Amortization Explained

What is Loan Amortization? All Four Types of Loan Amortization Explained

[00:00:40] Full Amortization - Full Principal & Interest Payments - Loan Paid Down to Zero [00:01:13] Partial Amortization - Partial Principal & Full Interest Payments - Balloon Payment [00:01:44] No Amortization - Interest Only Payments - No Principal Paid [00:02:07] Negative Amortization - No Principal Payments & Partial Interest Payments - Capitalized Interest --- Amortization is the term for paying down the cost of an asset at a certain rate. In the real estate world, typically when we're referring to amortization we are referring to the rate at which we are repaying the principal on a loan back to the lender. Let's take a look at this graphically. Full Amortization - Full Principal & Interest Payments - Loan Paid Down to Zero Imagine that we have our loan amount and time, let's say this is 30 years. If a loan is fully amortizing, it is paid off down to zero at the end of the life of the loan. It starts out at whatever the loan amount is and a fully amortizing loan is paid completely off. The most common example of a fully amortizing loan would be your standard 30-year fixed-rate home loan. You have an equal payment that goes every month for the entire life of the loan and at the very last payment, the loan balance is zero. Partial Amortization - Partial Principal & Full Interest Payments - Balloon Payment Sometimes we have what's called a partially amortizing loan and that would be when the loan is paid down but not all the way. In the case of a partially amortizing loan, we end up with a balloon payment. Typically when you find a partially amortizing loan it is often because payments are amortized over say 25 or 30 years, but the term of the loan is shorter and we have a balloon payment say after maybe 10 or 15 years. No Amortization - Interest Only Payments - No Principal Paid The next type of structure is no amortization. In other words, not paying any principal at all, we're simply paying interest only. The loan balance at the beginning of the loan never changes, it stays constant throughout the life of the loan because payments are only made to cover interest and not pay down any principal. Negative Amortization - No Principal Payments & Partial Interest Payments - Capitalized Interest Finally, sometimes we run into what we call negative amortization. Typically negative amortization occurs when payments are not sufficient to cover even the interest that has accrued each month or each period and any unpaid interest is capitalized onto the balance, thereby increasing the loan amount and the loan balance over time. Real Estate Finance & Investments textbook by Brueggeman and Fisher or by Peter Linneman --- For COACHING & COURSES, visit me at https://trevorcalton.com/ For COMMERCIAL LOANS & REAL ESTATE INVESTMENTS, visit https://evergeen.llc OTHER VIDEOS: Negative Leverage is HERE! - Learn How to Optimize Your Real Estate Returns When Interest Rates Rise: https://youtu.be/8QplNAC9RPI "I Inherited Real Estate and Don't Know Where to Start!" - Live Q&A (Edited):https://youtu.be/MG6qJQBJMmE Turn Housemates Into Your First Real Estate Investment! What You Need to Know Before House Hacking!:https://youtu.be/1VZhMKZ6Gbk HASHTAGS: #TrevorCalton #investing #realestate #EvergreenLLC #realestateinvesting #commercialrealestate #finance #realestatefinance #realestateloan #loans #lending #realtortraining #amortize #brueggeman #fisher #linneman OTHER QUERIES: loan amortization amortization amortization schedule amortization table loan amortization table what is loan amortization in real estate business all types of loan amortization explained shortly loan amortization in real estate all types of loan amortization types of loan amortization in real estate trevor calton academy real estate finance training amortization explained loans explained real estate business types of loan amortization amortization service ___________________ SUBSCRIBE PLEASE: https://www.youtube.com/channel/UCw0j049AchMAisbkhVhj6VA ____________________
What Is A Balloon Payment | How Balloon Payment Works For Borrowers Explained

What Is A Balloon Payment | How Balloon Payment Works For Borrowers Explained

What Is A Balloon Payment | How Balloon Payment Works For Borrower Explained For more content and in-depth training, check out my COURSES at https://trevorcalton.com For help with COMMERCIAL LOANS and REAL ESTATE INVESTING, visit https://www.evergreen.llc --- A Balloon Payment occurs when the payments on a loan are amortized over a longer period than the term of the loan. A loan may have a term of 3, 5, 7, or 10 years, while payments are amortized over 20 to 30 years. In this case, the final payment required to pay the loan off is called a "balloon payment" because it is higher than the previous payments. Amortization is the rate at which principal is paid down on a loan. A fully amortizing loan would have all of the principal paid down to the end at the last payment. But in the commercial world, lenders typically don't want to make 25 or 30 year loans. So quite often in commercial lending, we see loans that have partial amortization. Commercial lenders typically prefer to make 3, 5, 7, or 10 year loans. Not always, but often. However, if payments were amortized over, just say 10 years, then they would be astronomically high, and borrowers wouldn't be able to afford the payments and still have positive cashflow. So what's a very common is lenders will make a shorter term loan, but amortize the payments over say 25 or 30 years. The advantage of this is that it reduces the monthly burden and increases the cashflow for the borrower. So at the end of the loan term, the borrower ends up with what's called a balloon payment, and that balloon payment is just simply paying one last final payment that pays down the rest of the entire loan balance on the final payment. Watch Next - The 4 Ways Real Estate Builds Wealth: https://bit.ly/3cTNZca If you have questions, please share them in the comments below. We'll answer all questions -AND- your questions help us to build more helpful material! -- SUBSCRIBE for more commercial real estate & finance course videos - https://bit.ly/3y6U6lW --- Please subscribe AND check out our full courses at https://trevorcalton.com/ for more content and in-depth training. #TrevorCalton #investing #realestate #EvergreenLLC #realestateinvesting #commercialrealestate #finance #realestatefinance #realestateloan #loans #lending #realtortraining #brueggeman #fisher #linneman OTHER VIDEOS: Negative Leverage is HERE! - Learn How to Optimize Your Real Estate Returns When Interest Rates Rise: https://youtu.be/8QplNAC9RPI "I Inherited Real Estate and Don't Know Where to Start!" - Live Q&A (Edited):https://youtu.be/MG6qJQBJMmE Turn Housemates Into Your First Real Estate Investment! What You Need to Know Before House Hacking!:https://youtu.be/1VZhMKZ6Gbk OTHER QUERIES: what is a balloon payment 2022 mortgage how balloon payment works for borrower explained what is a balloon payment how balloon payment works how balloon payment works for borrower balloon payment explained real estate investing real estate balloon payment balloon payment real estate real estate investing strategies investing in real estate real estate business investing how balloon payment works in real estate payment payment method business invest payment term ___________________ SUBSCRIBE PLEASE: https://www.youtube.com/channel/UCw0j049AchMAisbkhVhj6VA ____________________
Why Your Loan Balance Goes UP After Making a Payment - Capitalization & Negative Amortization

Why Your Loan Balance Goes UP After Making a Payment - Capitalization & Negative Amortization

For more content and COURSES at https://trevorcalton.com/. For help with COMMERCIAL LOANS and REAL ESTATE INVESTING, visit https://www.evergreen.llc --- Have you noticed that your loan amount keeps going up, even though you're making your monthly payments? The first thing to understand is the concept of CAPITALIZED INTEREST. Imagine this is your loan amount. It doesn't matter what the number is, but imagine that's how much you owe on your statement that says what your loan balance is. If you paid just the interest that was due every month, that would be considered interest only, and your loan amount would never change. It would stay the same. If you pay the interest that you owe, plus some of the principal, then your loan amount over time would go down. But in a lot of cases, we are given a minimum payment amount that is actually not even enough to cover the interest that's due each month on the loan. In that case, the lender takes whatever interest was not paid and they add it to the loan amount. Each month, if you are not paying the interest portion of your payment, your loan balance will start to go up Although it seems like the bank might be being nice by giving you an income driven payment arrangement where you just pay what you can afford, you're just not paying enough to cover your interest every month. The second reason that sometimes your loan amounts going up is because if you have a VARIABLE INTEREST RATE on your loan, when that changes periodically, as opposed to a FIXED RATE in which the rate stays the same throughout the life of the loan, sometimes the amount of interest that you owe each month can go up. And if your payment doesn't change to adjust with that increased interest rate, then suddenly you're into, back into a situation where some of your interest is getting capitalized and put back onto your loan. We see this happen with student loans, credit cards, all kinds of different loans, especially those that have variable interest interest rates. Now let's talk about what you can do to stop this from happening and to start actually paying your loan down. The first thing you want to do is understand your interest rate. Sometimes it's not easy to even tell what your interest rate is on your loan just by looking at the statement. You might have to dig down, or you may have to contact your lender to find out what your current interest rate is. Once you understand your interest rate, then you can Determine how much interest is accruing on your loan each month and regardless of what the lender says, your minimum amount should be, you want to at least be covering the interest that's accruing. You want to find your interest rate, multiply that times your loan amount. That will give you your annual interest that's due. Then, divide that by 12 to get your monthly interest. Once you understand what your monthly interest accrual is, then you know what that interest only payment would be. If you paid just that amount, your loan balance would never change, because it doesn't include any principal. So then you determine if you're able to pay any amount above and beyond that monthly interest amount. If you can, you should, and then you'll start paying your loan down. If you're not able to afford even the monthly interest, then you should definitely contact your lender and see what your options are for refinancing. It's entirely possible that the lender will be able to either modify your existing loan and lower your rate, or another lender will refinance your loan, pay off your existing loan, and give you a new loan with better terms. I created a real simple spreadsheet for you. You can find the link down in the description, and it will help you determine what your monthly interest is and how fast you'll pay off your loan using various payment amounts. Real Estate Finance & Investments textbook by Brueggeman and Fisher or by Peter Linneman --- Please subscribe AND check out our full courses at https://trevorcalton.com/ for more content and in-depth training. DOWNLOAD: https://docs.google.com/spreadsheets/d/14I64LhszNnvlXmbMCopV3nFBstMgQIdfSOGXOVVN3ds/edit RELEVANT HASHTAGS: #TrevorCalton #personalfinance #investing #EvergreenLLC #studentloan #creditcard #debt #negativeamortization #capitalizedinterest #brueggeman #fisher #linneman Other Queries : why your loan balance goes up after making a payment why your loan balance keeps going up how come your loan balance keeps rising loan balance goes up after making a payment loan balance goes up capitalization and negative amortization real estate loan capitalization rules amortization explained why your loan debt going up Thank you for watching "Why Your Loan Balance Goes UP After Making a Payment - Capitalization & Negative Amortization". Please like, comment, subscribe, and hit the bell 🔔 so that you never miss any videos! 👉Subscribe to our channel: https://www.youtube.com/channel/UCw0j049AchMAisbkhVhj6VA
How Principal & Interest Are Applied In Loan Payments | Principal & Interest Explained With Examples

How Principal & Interest Are Applied In Loan Payments | Principal & Interest Explained With Examples

How Principal & Interest Are Applied In Loan Payments | Principal & Interest Explained With Examples This video explains how principal and interest is applied on a loan as payments are made over time. Amortization tables, and now of course, calculators and computers, give us the exact amount of how much a payment needs to be to cover the interest and to pay the loan off at a steady rate so that the loan is fully paid off to zero on the very last payment. Each payment contains both principal and the interest that has accrued over that period. Let's take a look at an example. Let's say we have a $100,000 loan at 6%, amortized over 30 years, our payment amount is going to be $599.55 each month. $599.55 is our payment amount all the way through the life of the loan. Contained within that $599 is both the interest that accrued that month, and also the amount if the principal it's going to take to pay down the loan at the steady rate that we've determined. Let's take a look at how that payment is broken down with each payment. With the first payment, when our balance on the loan is $100,000, six percent interest per year equals half a percent per month. So each month we are paying one half percent interest on the current balance. So on the very first payment, that half percent interest is $500, which means that the remainder of the payment, $99.55 goes toward principal. Since $99.55 was paid toward the principal, then when the second payment is due, the new balance on the loan is $99,900.45. So with the second payment, one half percent, or 6% annually, one half percent per month is due on the new balance. $99,900.45, which means that half a percent of that would be $499.50. As we can see, the amount of interest with each payment that's being charged on loan is going down and since the remainder of the payment is applied to principal, then on the second payment, $100.05 is applied to principal, thereby reducing the unpaid principal balance again, so that on the third payment, our new balance is $998.40. Half a percent on $99,800.40 is $499.00, which means that $100.54 will be paid towards principal, and so on and so forth. On our last payment, or 360th payment, our balance is $596.57. Of that, $2.98 is interest, and then $596.57 is our final principle payment that pays the loan down to zero. Real Estate Finance & Investments textbook by Brueggeman and Fisher or by Peter Linneman #investing #personalfinance #TrevorCalton #finance #principalandinterest #pandi #realestateinvesting #realestatetraining #realestatementoring #realestatefinance #brueggeman #fisher #linneman #EvergreenLLC OTHER VIDEOS: Negative Leverage is HERE! - Learn How to Optimize Your Real Estate Returns When Interest Rates Rise: https://youtu.be/8QplNAC9RPI "I Inherited Real Estate and Don't Know Where to Start!" - Live Q&A (Edited):https://youtu.be/MG6qJQBJMmE Turn Housemates Into Your First Real Estate Investment! What You Need to Know Before House Hacking!:https://youtu.be/1VZhMKZ6Gbk OTHER QUERIES: Principal interest interest payments interest rate investing in real estate mortgage payment p&i vs io principal and interest principal payments principal vs interest payments principal interest compound interest simple interest mortgage principal interest simple interest and compound interestinflation ___________________ SUBSCRIBE PLEASE: https://www.youtube.com/channel/UCw0j049AchMAisbkhVhj6VA ____________________ --- Please subscribe AND check out our full courses at https://trevorcalton.com/ for more content and in-depth training.
Mortgage Loan Points and Fees Explained | Real Estate Mortgage Discount Points and Loan Fees

Mortgage Loan Points and Fees Explained | Real Estate Mortgage Discount Points and Loan Fees

Mortgage Loan Points and Fees Explained | Real Estate Mortgage Discount Points and Loan Fees For more content and in-depth training, check out my COURSES at https://trevorcalton.com For help with COMMERCIAL LOANS and REAL ESTATE INVESTING, visit https://www.evergreen.llc --- Discount points and loan fees are additional charges that are added to the cost of getting a loan, and they're paid by the borrower. But it's important to understand what points and fees are and why they are included as part of the loan. Points are 1% of the loan amount. It's basically adding to the rate, and what discount points do is they allow the lender to capture some of their yield upfront at the beginning of the loan. The reason they're called discount points is because the borrower doesn't pay them to the lender. Typically the lender just deducts them from the loan amount. Lenders don't necessarily need to take the extra step of having the borrower give them a check for the point and then they cut a check to the borrower for the loan. They just deduct the point from the loan. So that's why it's called a discount point. It's discounted from the loan balance. Fees are charged by the lender typically to cover their origination costs. Lenders have staffing costs for people like underwriters, processors, and fees allow the lender just to recoup some of those costs. But here's, what's important to understand about points and fees. They actually increase the borrower's cost of capital. Let me show you an example. Imagine we have a $1 million loan at 6% amortized over 30 years, but the borrower has to pay 2 points plus $8500 in fees. Here's the effect of adding the points and fees into the loan. A $1 million loan at 6% for 30 years would have a $5995 payment per month, but because the lender discounts the points and fees. Out of the loan amount, the net cash that they disperse is $971,500. So the borrower still pays a $5995 payment, but they only actually received $971,500 in cash as their loan proceeds. Well, when you solve for RATE ( i ) on that with a 30 year amortization, the actual cost of those funds is 6.27%. And that's if the borrower holds the loan for 30 years. When the borrower holds the loan for less than 30 years, the effect on the actual cost of funds to the borrower is even greater. Real Estate Finance & Investments textbook by Brueggeman and Fisher or by Peter Linneman --- Please subscribe AND check out our full courses at https://trevorcalton.com/ for more content and in-depth training. CHECK OUT MY POPULAR VIDEOS: ___________________________________________________ ✔️How to Use Debt Service Coverage Ratio "DSCR" (with Examples) || https://youtu.be/2cFIwSgUOQM ✔️How to Calculate LTV - Loan to Value Ratio || https://youtu.be/N2I11H2SlAQ ✔️How Principal & Interest are Applied in Loan Payments (with Example) || https://youtu.be/JvEOX9DcZn8 ✔️How to Calculate Net Operating Income (NOI) || https://youtu.be/R3cGmYqHKeE ✔️What Are the Different Property Types in Real Estate? || https://youtu.be/UiXfa9zADZo ___________________________________________________ RELEVANT HASHTAGS: #investing #finance #trevorcalton #EvergreenLLC #realestate #discountpoints #loanfees #brueggeman #fisher #linneman #wacc #mortgagerate #mortgageloan Other Queries : discount points lender points mortgage loan points mortgage loans mortgage points mortgage points explained mortgage rate real estate weighted average cost of capital what are points on a loan what is wacc loan points explained mortgage loan points and fees explained real estate mortgage discount points and loan fees mortgage discount points and loan fees Explaining Mortgage Loan Points and Fees mortgage points and fees wacc explained Thank you for watching "Mortgage Loan Points and Fees Explained | Real Estate Mortgage Discount Points and Loan Fees". Please like, comment, subscribe, and hit the bell 🔔 so that you never miss any videos! 👉Subscribe to our channel: https://www.youtube.com/channel/UCw0j049AchMAisbkhVhj6VA