You're subtracting it from the earnings that you report to the Internal Revenue Service. If there's something that you might really take directly from your taxes, that's called a tax credit. So, if you were, uh, if there was some unique thing that you could actually deduct it straight from your credit, http://zionyvlh161.tearosediner.net/how-do-i-get-out-of-a-timeshare from your taxes, that's a tax credit, tax credit.
And so, in this spreadsheet I simply desire to show you that I in fact calculated in that month how much of a tax deduction do you get. So, for instance, just off of the very first month you paid $1,700 in interest of your $2,100 home loan payment. So, 35 percent of that, and I got the 35 percent as one of your assumptions, 35 percent of $1,700.
So, roughly throughout the first year I'm going to conserve about $7,000 in taxes, so that's nothing, nothing to sneeze at. Anyhow, hopefully you found this helpful and I motivate you to go to that spreadsheet and, uh, have fun with the assumptions, just the presumptions in this brown color unless you actually know what you're doing with the spreadsheet.
What I wish to finish with this video is discuss what a home mortgage is but I think the majority of us have a least a general sense of it. However even much better than that really enter into the numbers and comprehend a little bit of what you are really doing when you're paying a mortgage, what it's made up of and how much of it is interest versus just how much of it is actually paying down the loan.
Let's state that there is a home that I like, let's say that that is your home that I want to acquire. It has a cost tag of, let's say that I require to pay $500,000 to buy that house, this is the seller of your home right here.
I want to buy it. I wish to buy your home. This is me right here. And I have actually been able to save up $125,000. I have actually had the ability to save up $125,000 but I would truly like to reside in that house so I go to a bank, I go to a bank, get a brand-new color for the bank, so that is the bank right there.
Bank, can you provide me the rest of the quantity I need for that home, which is basically $375,000. I'm putting 25 percent down, this right, this right, this number right here, that is 25 percent of $500,000. So, I ask the bank, can I have a loan for the balance? Can I have a $375,000 loan? And the bank states, sure, you seem like, uh, uh, a great man with an excellent task who has an excellent credit ranking.
We need to have that title of your home and as soon as you settle the loan we're going to provide you the title of your house. So what's going to happen here is we're going to have the loan is going to go to me, so it's $375,000, $375,000 loan.
But the title of your house, the file that states who really owns your home, so this is the home title, this is the title of the house, house, house title. It will not go to me. It will go to the bank, the home title will go from the seller, perhaps even the seller's bank, possibly they have not settled their home loan, it will go to the bank that I'm borrowing from.
So, this is the security right here. That is technically what a home loan is. This vowing of the title for, as the, as the security for the loan, that's what a mortgage is. And in fact it comes from old French, mort, suggests dead, dead, and the gage, means pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead pledge.
When I settle the loan this promise of the title to the bank will pass away, it'll return to me. And that's why it's called a dead promise or a home loan. And most likely due to the fact that it originates from old French is the reason we don't say mort gage. We state, mortgage.
They're actually describing the home mortgage, home mortgage, the mortgage loan. And what I desire to perform in the rest of this video is utilize a little screenshot from a spreadsheet I made to in fact reveal you the mathematics or really show you what your home loan payment is going to. And you can download, you can download this spreadsheet at Khan Academy, khanacademy.org/downloads, downloads, slash home mortgage calculator, mortgage, or in fact, even much better, simply go to the download, simply go to the downloads, downloads, uh, folder on your web browser, you'll see a bunch of files and it'll be the file called mortgage calculator, home mortgage calculator, calculator dot XLSX.
But simply go to this URL and then you'll see all of the files there and after that you can simply download this file if you desire to play with it. But what it does here remains in this kind of dark brown color, these are the presumptions that you could input which you can alter these cells in your spreadsheet without breaking the entire spreadsheet.
I'm buying a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had actually saved up, that I 'd talked about right there. And after that the, uh, loan amount, well, I have the $125,000, I'm going to have to borrow $375,000. It determines it for us and then I'm going to get a pretty plain vanilla loan.
So, thirty years, it's going to be a 30-year set rate mortgage, repaired rate, repaired rate, which indicates the rates of interest won't alter. We'll discuss that in a bit. This 5.5 percent that I am paying on my, on the money that I obtained will not change over the course of the thirty years.
Now, this little tax rate that I have here, this is to actually find out, what is the tax cost savings of the interest reduction on my loan? And we'll speak about that in a second, we can disregard it for now. get more info And then these other things that aren't in brown, you should not mess with these if you actually do open this spreadsheet yourself.
So, it's literally the annual rate of interest, 5.5 percent, divided by 12 and most home loan are intensified on a monthly basis. So, at the end of every month they see how much cash you owe and then they will charge you this much interest on that for the month.