You're deducting it from the earnings that you report to the Internal Revenue Service. If there's something that you might really take straight 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, from your taxes, that's a tax credit, tax credit.
Therefore, in this spreadsheet I just want to show you that I really computed in that month just 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 mortgage payment. So, 35 percent of that, and I got the 35 percent as one of your presumptions, 35 percent of $1,700.
So, roughly throughout the first year I'm going to save about $7,000 in taxes, so that's absolutely nothing, nothing to sneeze at. Anyway, ideally you found this helpful and I encourage you to go to that spreadsheet and, uh, play with the presumptions, only the presumptions in this brown color unless you actually understand 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 basic sense of it. However even better than that actually enter into the numbers and comprehend a bit of what you are actually doing when you're paying a http://josuerybz272.fotosdefrases.com/how-to-sell-a-timeshare-on-ebay mortgage, what it's comprised of and just how much of it is interest versus just how much of it is really paying down the loan.
Let's say that there is a house that I like, let's say that that is the home that I want to acquire. It has a price of, let's say that I need to pay $500,000 to purchase that house, this is the seller of your home right here.
I want to buy it. I want to buy the house. This is me right here. And I've had the ability to conserve up $125,000. I've been able to save up $125,000 but I would truly like to reside in that home 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 amount I need for that home, which is essentially $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 says, sure, you look like, uh, uh, a good guy with an excellent job who has a good 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 the home. 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.
However the title of the house, the file that states who in fact owns your house, so this is the home title, this is the title of your 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 mortgage, it will go to the bank that I'm borrowing from.
So, this is the security right here. That is technically what a home mortgage is. This promising of the title for, as the, as the security for the loan, that's what a mortgage is. And really it comes from old French, mort, implies dead, dead, and the gage, suggests pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it comes from dead pledge.
Once I pay off the loan this promise of the title to the bank will die, it'll come back to me. And that's why it's called a dead promise or a home mortgage. And most likely because it originates from old French is the reason we do not state mort gage. We say, home loan.
They're really referring to the home mortgage, mortgage, the mortgage. And what I wish to do in the rest of this video is use a little screenshot from a spreadsheet I made to really show you the mathematics or really show you what your mortgage payment is going to. And you can download, you can download Hop over to this website this spreadsheet at Khan Academy, khanacademy.org/downloads, downloads, slash home mortgage calculator, home mortgage, or in fact, even better, simply go to the download, simply go to the downloads, downloads, uh, folder on your web internet browser, you'll see a lot of files and it'll be the file called mortgage calculator, home mortgage calculator, calculator dot XLSX.
However just go to this URL and after that you'll see all of the files there and after that you can simply download this file if you desire to play with it. However what it does here remains in this type of dark brown color, these are the presumptions that you might input and that you can change these cells in your spreadsheet without breaking the entire spreadsheet.
I'm purchasing a $500,000 home. It's a 25 percent down payment, so that's the $125,000 that I had actually conserved 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 computes it for us and after that I'm going to get a quite plain vanilla loan.
So, thirty years, it's going to be a 30-year set rate home loan, fixed rate, repaired rate, which means the interest rate will not alter. We'll discuss that in a little bit. This 5.5 percent that I am paying on my, on the cash that I obtained will not alter throughout the 30 years.
Now, this little tax rate that I have here, this is to really figure out, what is the tax savings of the interest reduction on my loan? And we'll speak about that in a 2nd, we can overlook it in the meantime. And then these other things that aren't in brown, you should not tinker these if you actually do open this spreadsheet yourself.
So, it's literally the yearly rate of interest, 5.5 percent, divided by 12 and many home loan are compounded on a month-to-month basis. So, at the end of every month they see just how much cash you owe and after that they will charge you this much interest on that for the month.