You're deducting it from the earnings that you report to the Internal Revenue Service. 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 special thing that you might really deduct it straight from your credit, from your taxes, that's a tax credit, tax credit.

Therefore, in this spreadsheet I simply wish to reveal you that I in fact calculated in that month how much of a tax reduction do you get. So, for example, simply off of the 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 presumptions, 35 percent of $1,700.

So, approximately throughout 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 http://caidenrqhn773.theburnward.com/timeshare-how-it-works presumptions, only the assumptions in this brown color unless you truly understand what you're doing with the spreadsheet.

What I wish to finish with this video is discuss what a home mortgage is but I think many of us have a least a basic sense of it. However even much better than that actually go into the numbers and comprehend a bit of what you are actually doing when you're paying a home mortgage, what it's made up of and just how much of it is interest versus just how much of it is really paying down the loan.

Let's say that there is a house that I like, let's say that that is the home that I would like to acquire. It has a price of, let's say that I require to pay $500,000 to buy that house, this is the seller of the house right here.

I want to buy it. I wish to purchase your house. This is me right here. And I have actually been able to save up $125,000. I have actually been able to save up $125,000 but I would truly 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 need for that house, 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 great job who has a good credit score.

We need to have that title of the home and as soon as you settle the loan we're going to offer 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.

However the title of your house, the file that says who really owns your house, so this is the home title, this is the title of the house, 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, maybe they haven't paid off 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 vowing of the title for, as the, as the security for the loan, that's what a home loan is. And really it comes from old French, mort, implies dead, dead, and the gage, implies promise, I'm, I'm a hundred percent sure I'm mispronouncing it, but it comes from dead pledge.

As soon as I pay off 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 home loan. And probably since it comes from old French is the factor why we don't state mort gage. We state, Go to this website home loan.

They're really describing the home mortgage, mortgage, the mortgage. 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 reveal you the mathematics or actually reveal 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 mortgage, or in fact, even better, just go to the download, simply 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 mortgage calculator, home loan 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 wish to have fun with it. But what it does here remains in this type 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 purchasing a $500,000 house. It's a 25 percent deposit, so that's the $125,000 that I had saved up, that I 'd discussed right over there. And then the, uh, loan amount, well, I have the $125,000, I'm going to need to borrow $375,000. It determines it for us and then I'm going to get a quite plain vanilla loan.

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

Now, this little tax rate that I have here, this is to in fact determine, what is the tax cost savings of the interest reduction on my loan? And we'll talk about that in a 2nd, we can neglect it for now. And after that these other things that aren't in brown, you should not tinker these if you really do open up this spreadsheet yourself.

So, it's literally the annual rate of interest, 5.5 percent, divided by 12 and most home loan are compounded on a regular monthly basis. So, at the end of every month they see how much money you owe and then they will charge you this much interest on that for the month.