But you could not presume it's consistent and play with the spreadsheet a bit. But I, what I would, I'm introducing this since as we pay for the financial obligation this number is going to get smaller sized. So, this number is getting smaller, let's state at some point this is only $300,000, then my equity is going to get larger.
Now, what I have actually done here is, well, really prior to I get to the chart, let me in fact reveal you how I compute the chart and I do this over the course of thirty years and it passes month. So, so you can imagine that there's in fact 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 do not show here, you obtained $375,000. Now, throughout that month they're going to charge you 0.46 percent interest, bear in mind 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 mortgage payments yet.
So, now before I pay any of my payments, rather of owing $375,000 at the end of the very first month I owe $376,718. Now, I'm a hero, I'm not going to default on my mortgage so I make that first home mortgage payment that we computed, that we determined 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 probably stating, hello, gee, I made a $2,000 payment, a roughly a $2,000 payment and my equity just increased by $410,000.
So, that extremely, in the start, your payment, your $2,000 payment is mainly interest. Just $410 of it is primary. However as you, and after that you, and then, so as your loan balance goes down you're going to pay less interest here therefore each of your payments are going to be more weighted towards principal and less weighted towards interest.
This is your brand-new prepayment balance. I pay my home loan once again. This is my brand-new loan balance. And notification, currently by month 2, $2.00 more went to primary and $2.00 less went to interest. And over the course of 360 months you're visiting that it's an actual, sizable difference.
This is the interest and principal portions of our home loan 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 discover, this is the exact, this is precisely our home mortgage payment, this $2,129. Now, on that really first month you saw that of my $2,100 only $400 of it, this is the $400, just $400 of it went to in fact pay down the principal, the actual loan amount.
The majority of it went for the interest of the month. But as I begin paying for the loan, as the loan balance gets smaller sized and smaller sized, 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 state if we head out here, this https://telegra.ph/how-much-is-a-westgate-timeshare-09-05 is month 198, there, that last month there was less interest so more of my $2,100 in fact goes to settle the loan.
Now, the last thing I desire to discuss in this video without making it too long is this concept of a interest tax deduction. So, a lot of times you'll hear monetary coordinators or realtors inform you, hey, the advantage of purchasing your home is that it, it's, it has tax advantages, and it does.
Your interest, not your entire payment. Your interest is tax deductible, deductible. And I wish to be really clear with what deductible ways. So, let's for example, discuss the interest fees. So, this entire time over thirty years I am paying $2,100 a month or $2,129.29 a month. Now, at the beginning a great deal of that is interest.
That $1,700 is tax-deductible. Now, as we go even more and further each month I get a smaller and smaller sized tax-deductible part of my real mortgage payment. Out here the tax deduction is in fact really little. As I'm preparing yourself to pay off my entire mortgage and get the title of my home.
This does not mean, let's say that, let's state in one year, let's state in one year I paid, I do not know, I'm going to make up a number, I didn't compute 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 state this deductible, and let's say prior to this, let's say prior to this I was making $100,000. Let's put the loan aside, let's say I was making $100,000 a year and let's say I was paying approximately 35 percent on that $100,000.
Let's state, you know, if I didn't have this mortgage I would pay 35 percent taxes which would have to do with $35,000 in taxes for that year. Just, this is just a rough estimate. Now, when you say that $10,000 is tax-deductible, the interest is tax-deductible, that does not imply that I can just take it from the $35,000 that I would have typically owed and only paid $25,000.
So, when I inform the Internal Revenue Service just how much did I make this year, instead of saying, I made $100,000 I state that I made $90,000 since I was able to deduct this, not straight from my taxes, I was able to subtract it from my income. So, now if I only made $90,000 and I, and this is I'm doing a gross oversimplification of how taxes actually get determined.