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You're subtracting it from the income that you report to the IRS. If there's something that you might in fact 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 computed because month just how much of a tax reduction do you get. So, for example, 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 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. Anyhow, ideally you found this handy and I encourage you to go to that spreadsheet and, uh, have fun with the presumptions, just the assumptions in this brown color unless you truly know what you're finishing with the spreadsheet.

What I wish to do with this video is describe what a home loan is but I believe most of us Click to find out more have a least a general sense of it. However even better than that really go 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 how much of it is really paying down the loan.

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

I wish to purchase it. I would like to purchase your home. This is me right here. And I've had the ability to conserve up $125,000. I've been able to save up $125,000 but I would actually like to live 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 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 guy with a good job who has a great credit score.

We have to have that title of your house and when you settle the loan we're going to provide you the title of your house. 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 home, the document that states who in fact owns the home, so this is the house 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, possibly they have not paid off their home loan, it will go to the bank that I'm obtaining from.

So, this is the security right here. That is technically what a home loan is. This pledging of the title for, as the, as the security for the loan, that's what a home loan is. And in fact it comes from old French, mort, suggests dead, dead, and the gage, suggests promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it comes from dead promise.

When I settle the loan this pledge of the title to the bank will die, it'll return to me. And that's why it's called a dead pledge or a mortgage. And probably because it comes from old French is the reason we do not say mort gage. We state, mortgage.

They're truly describing the home loan, home mortgage, the mortgage. And what I wish to perform in the rest of this video is use a little screenshot from a spreadsheet I made to in fact show you the mathematics or really 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 loan calculator, home loan, or in fact, even better, simply go to the download, just go to the downloads, downloads, uh, folder on your web browser, you'll see a lot of files and it'll be the file called mortgage calculator, mortgage calculator, calculator dot XLSX.

However just go to this URL and after that you'll see all of the files there and then you can just download this file if you desire to have fun with it. But what it does here is in this type of dark brown color, these are the presumptions that you could input and that you can alter 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 actually conserved up, that I 'd spoken about right there. And after that the, uh, loan amount, well, I have the $125,000, I'm going to have to obtain $375,000. It computes it for us and then I'm going to get a pretty plain vanilla loan.

So, thirty years, it's going to be a 30-year fixed rate mortgage, fixed rate, repaired rate, which suggests the rate of interest won't alter. We'll talk about that in a bit. This 5.5 percent that I am paying on my, on the cash that I borrowed will not change throughout the 30 years.

Now, this little tax rate that I have here, this is to really figure out, what is the tax cost savings of the interest deduction on my loan? And we'll speak about that http://andresgxbj531.over-blog.com/2020/09/how-do-i-get-a-timeshare.html in a 2nd, we can disregard it for now. And after that these other things that aren't in brown, you shouldn't mess with these if you actually do open this spreadsheet yourself.

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