But you could not assume it's continuous and have fun with the spreadsheet a bit. https://dallaskznt068.tumblr.com/post/628675576443666432/how-to-invest-in-a-timeshare But I, what I would, I'm introducing this because as we pay down the debt this number is going to get smaller. So, this number is getting smaller, let's state at some time this is just $300,000, then my equity is going to get larger.
Now, what I have actually done here is, well, really before I get to the chart, let me actually reveal you how I determine the chart and I do this throughout thirty years and it goes by month. So, so you can envision 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 zero, which I do not reveal 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 haven't made any home loan payments yet.
So, now before I pay any of my payments, rather of owing $375,000 at the end of the first month I owe $376,718. Now, I'm a hero, I'm not going to default on my home loan so I make that first home mortgage payment that we computed, that we computed right over here.
Now, this right here, what I, little asterisk here, this is my equity now. So, keep in mind, I started 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 increased by precisely $410. Now, you're probably stating, hello, gee, I made a $2,000 payment, an approximately 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. However as you, and then you, and then, so as your loan balance decreases you're Click for info 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 mortgage once again. This is my brand-new loan balance. And notification, already by month 2, $2.00 more went to principal and $2.00 less went to interest. And throughout 360 months you're visiting that it's an actual, sizable difference.
This is the interest and primary parts of our mortgage payment. So, this entire height right here, this is, let me scroll down a little bit, this is by month. So, this entire height, if you notice, this is the specific, this is exactly our 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, only $400 of it went to really pay for the principal, the actual loan amount.
Many of it chose the interest of the month. But as I start 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 say if we go out here, this is month 198, over there, that last month there was less interest so more of my $2,100 really goes to settle the loan.
Now, the last thing I desire to speak about in this video without making it too long is this concept of a interest tax deduction. So, a great deal of times you'll hear monetary organizers or realtors inform you, hey, the advantage of buying your house is that it, it's, it has tax benefits, 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 circumstances, speak about the interest fees. So, this whole time over thirty years I am paying $2,100 a month or $2,129.29 a month. Now, at the starting a great deal of that is interest.
That $1,700 is tax-deductible. Now, as we go further and even more each month I get a smaller sized and smaller sized tax-deductible portion of my actual mortgage payment. Out here the tax deduction is actually extremely small. As I'm preparing yourself to settle my entire home mortgage and get the title of my home.
This doesn't indicate, let's state that, let's say in one year, let's say in one year I paid, I don't know, I'm going to comprise a number, I didn't calculate 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, but let's state $10,000 went to interest. To state this deductible, and let's say before 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 say I was paying approximately 35 percent on that $100,000.
Let's state, you understand, if I didn't have this home loan 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 quote. Now, when you state that $10,000 is tax-deductible, the interest is tax-deductible, that does not mean that I can simply take it from the $35,000 that I would have normally owed and just paid $25,000.
So, when I tell the IRS how much did I make this year, instead of stating, I made $100,000 I state that I made $90,000 since I had the ability to subtract 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 really get calculated.