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But you could not assume it's continuous and play with the spreadsheet a little bit. However I, what I would, I'm introducing this due to the fact that as we pay down the financial obligation this number is going to get smaller. So, this number is getting smaller sized, let's state at some point this is just $300,000, then my equity is going to get larger.

Now, what I've done here is, well, really before I get to the chart, let me really reveal you how I compute the chart and I do this throughout 30 years and it goes by month. So, so you can think of that there's really 360 rows here on the actual spreadsheet and you'll see that if you go and open it up.

So, on month absolutely no, which I don't reveal here, you borrowed $375,000. Now, over the course of that month they're going to charge you 0.46 percent interest, remember that was 5.5 percent divided by 12. 0.46 percent interest on $375,000 is $1,718.75. So, I have not made any home loan payments yet.

So, now before I pay any of my payments, instead of owing $375,000 at the end of the first month I owe $376,718. Now, I'm a great man, I'm not going to default on my home mortgage so I make that very first mortgage payment that we computed, that we calculated right over here.

Now, this right here, what I, little asterisk here, this is my equity now. So, remember, I began with $125,000 of equity. After paying one loan balance, after, after my first payment I now have $125,410 in equity. So, my equity has actually gone up by precisely $410. Now, you're most likely saying, hey, gee, I made a $2,000 payment, a roughly a $2,000 payment and my equity only increased by $410,000.

So, that very, in the beginning, your payment, your $2,000 payment is primarily interest. Only $410 of it is principal. But as you, and after that you, and then, so as your loan balance goes down you're going to pay less interest here and so each of your payments are going to be more weighted towards principal and less weighted towards interest.

This is your new prepayment balance. I pay my home mortgage again. This is my new loan balance. And notification, already by month 2, $2.00 more went to principal and $2.00 less went to interest. And over the course of 360 months you're going to see that it's a real, sizable distinction.

This is the interest and principal parts of our home mortgage payment. So, this entire height right here, this is, let me scroll down a little bit, this is by month. So, this whole height, if you see, this is the precise, this is exactly our mortgage payment, this $2,129. Now, on that extremely first month you saw that of my $2,100 only $400 of it, this is the $400, just $400 of it went to really pay down the principal, the real loan quantity.

The majority of it went for the interest of the month. However as I begin paying down the loan, as the loan balance gets smaller sized and smaller, each of my payments, there's less interest to pay, let me do a much better color than that. There is less interest, let's say if we head out here, this is month 198, over there, that last month there was less interest so more of my $2,100 actually goes to settle the loan.

Now, the last thing I wish to talk about in this video without making it too long is this concept of a interest tax deduction. So, a lot of times you'll hear financial coordinators or real estate agents tell you, hey, the advantage of buying your home is that it, it's, it has tax benefits, and it does.

Your interest, not your entire payment. Your interest is tax deductible, deductible. https://mylesoici619.skyrock.com/3335336048-where-to-buy-a-timeshare.html And I wish to be extremely clear with what deductible ways. So, let's for example, talk about the interest fees. So, this whole time over 30 years I am paying $2,100 a month or $2,129.29 a month. Now, at the beginning a lot of that is interest.

That $1,700 is tax-deductible. Now, as we go further and further each month I get a smaller and smaller tax-deductible part of my actual home loan payment. Out here the tax deduction is really really small. As I'm preparing to pay off my whole mortgage and get the title of my home.

This does not suggest, let's say that, let's say in one year, let's say in one year I paid, I do not know, I'm going to make up a number, I didn't determine it on the spreadsheet. Let's say in year one, year one, I pay, I pay $10,000 in interest, $10,000 in interest.

And, however let's state $10,000 went to interest. To say this deductible, and let's say prior to this, let's say before this I was making $100,000. Let's put the loan aside, let's state I was making $100,000 a year and let's state I was paying approximately 35 percent on that $100,000.

Let's say, you know, if I didn't have this home loan I would pay 35 percent taxes which would be about $35,000 in taxes for that year. Just, this is simply a rough price quote. Now, when you say that $10,000 is tax-deductible, the interest is tax-deductible, that does not indicate that I can simply take it from the $35,000 that I would have usually owed and only paid $25,000.

So, when I inform the IRS just how much did I make this year, rather of saying, I made $100,000 I state that I made $90,000 due to the fact that I had the ability to subtract this, not directly from my taxes, I was able to subtract it from my earnings. So, now if I just made $90,000 and I, and this is I'm doing a gross oversimplification of how taxes really get calculated.