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You're subtracting it from the earnings that you report to the Internal Revenue Service. If there's something that you might in fact take straight from Click to find out more your taxes, that's called a tax credit. So, if you were, uh, if there was some unique thing that you could really deduct it straight from your credit, from your taxes, that's a tax credit, tax credit.

And so, in this spreadsheet I just desire to show you that I in fact computed because month just how much of a tax deduction do you get. So, for example, simply 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 over the course of the very first year I'm going to conserve about $7,000 in taxes, so that's absolutely nothing, absolutely nothing to sneeze at. Anyway, hopefully you found this helpful and I motivate you to go to that spreadsheet and, uh, have fun with the assumptions, just the assumptions in this brown color unless you truly understand what you're finishing with the spreadsheet.

What I want to make with this video is discuss what a home mortgage is but I believe the majority of us have a least a general sense of it. However even much better than that actually enter into the numbers and comprehend a little bit of what you are really doing when you're paying a home loan, what it's made up of and just how much of it is interest versus just how much of it is actually paying for the loan.

Let's state that there is a home that I like, let's say that that is the house that I wish to purchase. It has a price of, let's say that I need to pay $500,000 to purchase that home, this is the seller of your house right here.

I wish to buy it. I want to purchase the house. This is me right here. And I've been able to conserve up $125,000. I've had the ability to conserve up $125,000 but I would actually like to reside in that house 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 quantity I require 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 states, sure, you look like, uh, uh, a good guy with a good task who has an excellent credit rating.

We have to have that title of the home and once you settle 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.

But the title of your house, the document that states who in fact owns your home, so http://andresgxbj531.over-blog.com/2020/09/how-do-i-get-a-timeshare.html this is the home title, this is the title of the home, house, home title. It will not go to me. It will go to the bank, the house title will go from the seller, possibly even the seller's bank, maybe they haven't 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 mortgage is. This pledging of the title for, as the, as the security for the loan, that's what a mortgage is. And really it originates from old French, mort, indicates dead, dead, and the gage, indicates promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it originates from dead promise.

Once 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 since it comes from old French is the reason that we don't say mort gage. We state, mortgage.

They're truly describing the home mortgage, mortgage, the home mortgage loan. And what I want to carry out in the rest of this video is use a little screenshot from a spreadsheet I made to actually show you the math or in fact show you what your home mortgage 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 in fact, even better, simply go to the download, just 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 home mortgage calculator, mortgage calculator, calculator dot XLSX.

However just go to this URL and then you'll see all of the files there and after that you can just download this file if you wish to play with it. But what it does here is in this sort of dark brown color, these are the assumptions 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 down payment, so that's the $125,000 that I had conserved 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 borrow $375,000. It determines it for us and then I'm going to get a pretty plain vanilla loan.

So, 30 years, it's going to be a 30-year fixed rate home loan, fixed rate, fixed rate, which implies the interest rate won't change. We'll discuss that in a bit. This 5.5 percent that I am paying on my, on the money 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 in fact find out, what is the tax cost savings of the interest reduction on my loan? And we'll discuss that in a 2nd, we can neglect it in the meantime. And then these other things that aren't in brown, you shouldn't tinker these if you really do open up this spreadsheet yourself.

So, it's literally the annual rates of interest, 5.5 percent, divided by 12 and the majority of home mortgage loans are compounded on a month-to-month basis. So, at the end of each month they see how much cash you owe and then they will charge you this much interest on that for the month.