You're deducting it from the income 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 in fact subtract it straight from your credit, from your taxes, that's a tax credit, tax credit.
And so, in this spreadsheet I just want to reveal you that I actually determined in that month how much of a tax deduction do you get. So, for instance, simply off of the very first month you paid $1,700 in interest of your $2,100 mortgage payment. So, 35 percent of that, and I got the 35 percent as one of your assumptions, 35 percent of $1,700.
So, approximately throughout the first year I'm going to conserve about $7,000 in taxes, so that's nothing, absolutely nothing to sneeze at. Anyhow, hopefully you discovered this practical and I motivate you to go to that spreadsheet and, uh, have fun with the presumptions, only the presumptions in this brown color unless you really understand what you're doing with the spreadsheet.
What I want to make with this video is describe what a mortgage is however I think the majority of us have a least a general sense of it. But even much better than that really go into the numbers and comprehend a little bit of what you are in fact doing when you're paying a home mortgage, what it's comprised of and how much of it is interest versus just how much of it is actually paying down the loan.
Let's say that there is a house that I like, let's say that that is your home that I wish to acquire. It has a cost of, let's state that I require to pay $500,000 to buy that home, this is the seller of the house right here.
I wish to purchase it. I would like to purchase the house. This is me right here. And I have actually been able to save up $125,000. I have actually had the ability to conserve up $125,000 but I would really like to live 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 remainder 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 look like, uh, uh, a great man with a good job who has a good credit ranking.
We have to have that title of the home and once you pay off the loan we're going to provide you the title of the home. So what's going to occur 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 the house, the file that states who really owns your home, so this is the home title, this is the title of your home, house, house title. It will not go to me. It will go to the bank, the house title will go from the seller, perhaps even the seller's bank, maybe they haven't 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 mortgage is. This vowing of the title for, as the, as the security for the loan, that's what a home loan is. And actually it originates from old French, mort, suggests dead, dead, and the gage, suggests pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead pledge.
As soon as I settle the loan this pledge 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 mortgage. And probably because it comes from old French is the reason that we do not say mort gage. We state, mortgage.
They're really describing the home loan, home mortgage, the home loan. And what I want to perform in the rest of this video is use a little screenshot from a spreadsheet I made to actually reveal you the mathematics or actually 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 mortgage calculator, mortgage, or in fact, even much better, just go to the download, just go to the downloads, downloads, uh, folder on your web internet browser, you'll see a bunch of files and it'll be the file called mortgage calculator, mortgage calculator, calculator dot XLSX.
However simply go to this URL and after that you'll see all of the files there and after that you can just download this file if you wish to have fun with it. But what it does here remains in this type of dark brown color, these are the assumptions that you could input and that you can alter these cells in your spreadsheet without breaking the whole spreadsheet.
I'm purchasing a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had actually conserved up, that I 'd discussed right there. And after that the, uh, loan quantity, well, I have the $125,000, I'm going to need to borrow $375,000. It computes it for us and then I'm going to get a quite plain vanilla loan.
So, 30 years, it's going to be a 30-year set rate home loan, repaired rate, fixed rate, which implies the rates of interest won't alter. We'll speak about that in a bit. This 5.5 percent that I am paying on my, on the Visit this link money that I obtained will not alter throughout the thirty years.
Now, this little tax rate that I have here, this is to really find out, what is the tax cost savings of the interest deduction on my loan? And we'll talk about that in a 2nd, we can ignore it for now. And then these other things that aren't in brown, you shouldn't tinker these if you actually do open up this spreadsheet yourself.
So, it's actually the yearly rates of interest, 5.5 percent, divided by 12 and the majority of mortgage are intensified on a regular monthly basis. So, at http://cashykza479.huicopper.com/how-to-buy-a-timeshare-resale the end of on a monthly basis they see how much cash you owe and then they will charge you this much interest on that for the month.