Mortgage-Backed Securities (MBS) Explained - Courtesy of khanacademy 1/3

[machintruc313]

@PlanetEarthAwakens01 One thing. In the beginning, when you go to the bank for a 1 million dollar "loan", you don't get a loan from the bank. Your signature on the mortgage note creates it. You are in the originator. The bank writes your "loan" in a double ledger. One describing you as the creditor, another one as the debtor. Two books. Then the bank credits the seller from the debtor side and gives you back a check to pay for the house and makes you pay 2.5 times your "loan: over 30 years.

[kclcharlie4]

@thehowcow1 nope. as he mentioned it is an 'interest-only' loan which is a type of mortgage you can get. With interest only loan you pay the interest ONLY throughout year after year until maturity when you pay off the principal and the interest for the maturity year. So example in a 10 year loan $1M with interest rate of 10%, year 1= 10% of 1M = 100K = year 2 = yr 3....=year 9, but in year 10=you need to pay off the whole loan amount 1M +your usual interest of 100K.

[thehowcow1]

I know this is an old video so i am not sure if you can respond but do you not pay 110,000 per year to have it all payed off in 10 years? I guess I got a bit confused as you said 1.1 million in year 10.