Table of ContentsHow How Many Types Of Reverse Mortgages Are There can Save You Time, Stress, and Money.Getting My Who Offers Interest Only Mortgages To Work9 Easy Facts About What To Know About Mortgages ExplainedHow What Are Interest Rates For Mortgages can Save You Time, Stress, and Money.
Now, what I have actually done here is, well, actually before I get to the chart, let me really reveal you how I determine the chart and I do this over the course of 30 years and it passes month. So, so you can https://tysonzeff828.es.tl/Some-Known-Incorrect-Statements-About-How-Many-Mortgages-Can-You-Have-At-Once.htm picture that there's really 360 rows here on the actual spreadsheet and you'll see that if you go and open it up. what is a fixed rate mortgages.
So, on month no, which I do not reveal here, you obtained $375,000. Now, over the course of that month they're going to charge you 0.46 percent interest, keep 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 home loan payments yet.
So, now prior to I pay any of my payments, instead of owing $375,000 at the end of the first month I owe $376,718. Now, I'm a great guy, I'm not going to default on my home loan so I make that first home loan payment that we determined, that we determined 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 actually increased by exactly $410. Now, you're most likely saying, hi, gee, I made a $2,000 payment, a roughly a $2,000 payment and my equity only went up by $410,000.
So, that really, in the start, your payment, your $2,000 payment is mainly interest. Only $410 of it is principal. However as you, and after that you, and after that, so as your loan balance decreases 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 new prepayment balance. I pay my home loan again. This is my new loan balance. And notice, already by month 2, $2.00 more went to primary and $2.00 less went to interest. And throughout 360 months you're visiting that it's an actual, substantial difference.
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This is the interest and principal portions of our mortgage payment. So, this whole height right here, this is, let me scroll down a bit, this is by month. So, this entire height, if you see, this is the exact, this is precisely our home mortgage payment, this $2,129 (how mortgages work). Now, on that extremely first month you saw that of my $2,100 only $400 of it, this is the $400, Browse around this site only $400 of it went to in fact pay for the principal, the actual loan quantity.
Most of it opted for 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 go out here, this is month 198, over 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 want to discuss in this video without making it too long is this idea of a interest tax reduction. So, a great deal of times you'll hear financial planners or real estate agents inform you, hey, the advantage of purchasing your house is that it, it's, it has tax benefits, and it does. what is the current interest rate for mortgages.
Your interest, not your whole payment. Your interest is tax deductible, deductible. And I wish to be really clear with what deductible methods. So, let's for instance, talk about the interest costs. 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 lot 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 tax-deductible portion of my real mortgage payment. Out here the tax deduction is in fact extremely small. As I'm preparing to settle my entire home mortgage and get the title of my home.
This does not indicate, let's say that, let's state in one year, let's state in one year I paid, I do not understand, 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.
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And, but let's say $10,000 went to interest. To say this deductible, and let's say before 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 state I was paying approximately 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 have to do with $35,000 in taxes for that year. Simply, this is simply a rough estimate. Now, when you state that $10,000 is tax-deductible, the interest is tax-deductible, that does not indicate that I can just take it from the $35,000 that I would have usually owed and only paid $25,000.
So, when I inform the IRS just how much did I make this year, instead of stating, I made $100,000 I say that I made $90,000 because I was able to deduct this, not directly from my taxes, I was able to deduct 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 computed.
Let's get the calculator. So, 90 times.35 amounts to $31,500. So, this will amount to $31,500, put a comma here, $31,500. So, off of a $10,000 reduction, $10,000 of deductible interest, I basically saved $3,500. I did not save $10,000. So, another way to believe about it if I paid $10,000 interest, I'm going to, and my tax rate is 35 percent, I'm going to conserve 35 percent of this in actual taxes.
You're deducting it from the earnings that you report to the IRS. If there's something that you could 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 could in fact deduct it straight from your credit, from your taxes, that's a tax credit, tax credit.
And so, in this spreadsheet I simply desire to reveal you that I really determined in that month how much of a tax deduction do you get. So, for instance, simply off of the first month you paid $1,700 in interest of your $2,100 home mortgage payment. So, 35 percent of that, and I got the 35 percent as one of your assumptions, 35 percent of $1,700 - what is a fixed rate mortgages.
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So, approximately throughout the first year I'm going to save about $7,000 in taxes, so that's nothing, nothing to sneeze at. Anyway, ideally you found this helpful and I encourage you to go to that spreadsheet and, uh, have fun with the assumptions, only the presumptions in this brown color unless you really understand what you're doing with the spreadsheet.