But you might not assume it's consistent and have fun with the spreadsheet a little bit. But I, what I would, I'm introducing this since as we pay down the debt this number is going to get smaller sized. So, this number is getting smaller sized, let's state at some point this is just $300,000, then my equity is going to get larger.
Now, what I have actually done here is, well, actually prior to I get to the chart, let me in fact reveal you how I calculate the chart and I do this over the course of thirty years and it goes by month. So, so you can picture that there's actually 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 don't reveal here, you obtained $375,000. Now, over the course of 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 Check out this site pay any of my payments, instead of owing $375,000 at the end of the first month I owe $376,718. Now, I'm an excellent person, I'm not going to default on my home mortgage so I make that first mortgage payment that we determined, that we calculated right over here.
Now, this right here, what I, little asterisk here, this is my equity now. So, remember, I started with $125,000 of equity. After paying one loan balance, after, after my very first payment I now have $125,410 in equity. So, my equity has gone up by exactly $410. Now, you're probably stating, hey, gee, I made a $2,000 payment, an approximately a $2,000 payment and my equity only went up by $410,000.
So, that really, in the beginning, your payment, your $2,000 payment is primarily interest. Just $410 of it is principal. However as you, and then you, and after that, so as your loan balance goes down you're 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 brand-new prepayment balance. I pay my home loan again. This is my 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 going to see that it's a real, sizable difference.
This is the interest and primary portions of our home mortgage payment. So, this entire height right here, this is, let me scroll down a bit, this is by month. So, this whole height, if you discover, this is the precise, this is exactly our home mortgage payment, this $2,129. Now, on that very first month you saw that of my $2,100 only $400 of it, this is the $400, just $400 of it went to actually pay down the principal, the real loan amount.
The majority of it chose the interest of the month. However as I start paying down the loan, as the loan balance gets smaller 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 head out here, this is month 198, there, that last month there was less interest so more of my $2,100 actually goes to pay off the loan.
Now, the last thing I wish to talk about in this video without making it too long is this concept of a interest tax reduction. So, a great deal of times you'll hear monetary coordinators or real estate agents inform you, hey, the advantage of buying 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 want to be very clear with what deductible ways. So, let's for circumstances, talk about the interest fees. So, this whole time over 30 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 further monthly I get a smaller sized and smaller sized tax-deductible part of my real home mortgage payment. Out here the tax reduction is really extremely little. As I'm preparing to pay off my whole mortgage and get the title of my house.
This doesn't suggest, let's say that, let's state in one year, let's state in one year I paid, I don't know, I'm going to make up a number, I didn't determine 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 say this deductible, and let's say prior to this, let's state before 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 state I was paying roughly 35 percent on that $100,000.
Let's state, you understand, if I didn't have this home mortgage I would pay 35 percent taxes which would be about $35,000 in taxes for that year. Just, this is simply a rough quote. Now, when you state that $10,000 is tax-deductible, the interest is tax-deductible, that does not indicate that I can simply take it from the $35,000 that I would have generally owed and only paid $25,000.
So, when I tell the Internal Revenue Service how much did I make this year, instead of stating, I made $100,000 I say that I made $90,000 since I was able to deduct https://lachulvqey.doodlekit.com/blog/entry/10610368/how-to-sell-a-timeshare-deed this, not directly from my taxes, I was able to subtract it from my earnings. So, now if I just made $90,000 and I, and this is I'm doing a gross oversimplification of how taxes really get computed.