You're subtracting it from the income that you report to the Internal Revenue Service. If there's something that you might actually take straight from your taxes, that's called a tax credit. So, if you were, uh, if there was some special thing that you could in fact deduct 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 really determined because month just how much of a tax deduction do you get. So, for instance, 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 assumptions, 35 percent of $1,700.
So, https://dantenhty530.hatenablog.com/entry/2020/09/08/150607 roughly throughout the first year I'm going to conserve about $7,000 in taxes, so that's absolutely nothing, absolutely nothing to sneeze at. Anyhow, hopefully you discovered this valuable and I encourage you to go to that spreadsheet and, uh, have fun with the presumptions, just the presumptions in this brown color unless you truly know what you're doing with the spreadsheet.
What I desire to finish with this video is explain what a home loan is but I think most of us have a least a general sense of it. But even much better than that in fact enter into the numbers and understand a bit of what you are in fact doing when you're paying a mortgage, what it's comprised of and how much of it is interest versus just how much of it Hop over to this website is really paying for the loan.
Let's say that there is a home that I like, let's state that that is your house that I want to purchase. It has a cost of, let's state that I require to pay $500,000 to buy that house, this is the seller of the house right here.
I wish to buy it. I wish to purchase your home. This is me right here. And I have actually had the ability to conserve up $125,000. I have actually had the ability to conserve up $125,000 however 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 lend me the remainder of the amount I require 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 says, sure, you appear like, uh, uh, a great man with a good job who has a great credit ranking.
We need to have that title of your house and when you pay off the loan we're going to give you the title of your 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.
However the title of your house, the document that states who actually owns your home, so this is the home title, this is the title of the house, house, home 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, 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 loan 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, means dead, dead, and the gage, indicates pledge, I'm, I'm a hundred percent sure I'm mispronouncing it, however it originates from dead promise.
When I pay off the loan this promise of the title to the bank will pass away, it'll return to me. Which's why it's called a dead promise or a mortgage. And most likely because it comes from old French is the factor why we don't state mort gage. We state, mortgage.
They're truly referring to the mortgage, mortgage, the home mortgage loan. And what I want to perform in the rest of this video is utilize a little screenshot from a spreadsheet I made to in fact show 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 really, even better, simply go to the download, just 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 home mortgage calculator, mortgage calculator, calculator dot XLSX.
But just 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 want to play with it. But 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 buying a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had conserved up, that I 'd spoken about right over there. And then the, uh, loan amount, well, I have the $125,000, I'm going to have to obtain $375,000. It calculates 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 loan, repaired rate, repaired rate, which suggests the rates of interest won't alter. We'll speak about that in a little bit. This 5.5 percent that I am paying on my, on the cash 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 determine, what is the tax cost savings of the interest deduction on my loan? And we'll speak about that in a 2nd, we can overlook it for now. And after that these other things that aren't in brown, you should not mess with these if you in fact do open up this spreadsheet yourself.
So, it's literally the annual interest rate, 5.5 percent, divided by 12 and the majority of mortgage are compounded on a monthly basis. So, at the end of monthly they see just how much money you owe and then they will charge you this much interest on that for the month.