You're deducting it from the earnings that you report to the Internal Revenue Service. If there's something that you could really take directly from your taxes, that's called a tax credit. So, if you were, uh, if there was some special thing that you could actually subtract it directly from your credit, from your taxes, that's a tax credit, tax credit.
And so, in this spreadsheet I simply wish to reveal you that I in fact computed because month how much of a tax deduction do you get. So, for example, just off of the 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, approximately over the course of the first year I'm going to conserve about $7,000 in taxes, so that's absolutely nothing, nothing to sneeze at. Anyhow, hopefully you discovered this helpful and I motivate 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 make with this video is describe what a home mortgage is however I think most of us have a least a basic sense of it. However even much better than that in fact go into the numbers and understand a little bit of what you are in fact doing when you're paying a home mortgage, what it's made up of and how much of it is interest versus how much of it is really paying for the loan.
Let's state that there is a house that I like, let's say that that is your house that I want to buy. It has a cost tag of, let's state that I require to pay $500,000 to purchase that house, this is the seller of the home right here.
I would like to buy it. I would like to buy your house. This is me right here. And I've had the ability to save up $125,000. I've had the ability to conserve up $125,000 however I would actually like to reside in that house so I go to a bank, I go to a bank, get a new color for the bank, so that is the bank right there.
Bank, can you provide me the rest of the amount I require for that house, 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 good person with a good job who has a good credit ranking.
We have to have that title of your house and as soon as you pay off the loan we're going to offer you the title of your house. So what's going to take place 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 Discover more here of your home, the file that states who in fact owns your home, so this is the home title, this is the title of the 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, perhaps 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 mortgage is. This pledging of the title for, as the, as the security for the loan, that's what a mortgage is. And in fact it originates from old French, mort, suggests dead, dead, and the gage, means promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it comes from dead pledge.
When I pay off the loan this promise of the title to the bank will die, it'll come back to me. Which's why it's called a dead promise or a home mortgage. And most likely because it originates from old French is the factor why we don't state mort gage. We say, home mortgage.
They're truly describing the mortgage, mortgage, the mortgage loan. And what I http://emiliojjgb047.theglensecret.com/what-is-my-timeshare-worth desire to do in the rest of this video is utilize a little screenshot from a spreadsheet I made to really reveal you the math or in fact reveal 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, home loan, or actually, even much better, simply 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 home mortgage calculator, home loan calculator, calculator dot XLSX.
But just go to this URL and then you'll see all of the files there and then you can simply download this file if you wish to play with it. However what it does here remains in this kind of dark brown color, these are the assumptions that you could 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 deposit, so that's the $125,000 that I had saved up, that I 'd spoken about right over there. And then the, uh, loan quantity, well, I have the $125,000, I'm going to have to obtain $375,000. It determines it for us and then I'm going to get a quite plain vanilla loan.
So, thirty years, it's going to be a 30-year fixed rate home mortgage, repaired rate, repaired rate, which suggests the interest rate won't change. We'll talk about that in a little bit. This 5.5 percent that I am paying on my, on the money that I borrowed will not change throughout the 30 years.
Now, this little tax rate that I have here, this is to actually figure out, what is the tax savings of the interest deduction on my loan? And we'll speak about that in a 2nd, we can ignore it for now. And after that these other things that aren't in brown, you shouldn't mess with these if you in fact do open up this spreadsheet yourself.
So, it's literally the yearly rates of interest, 5.5 percent, divided by 12 and many home loan are intensified on a monthly basis. So, at the end of every month they see just how much money you owe and after that they will charge you this much interest on that for the month.