However you could not assume it's continuous and play with the spreadsheet a little bit. But I, what I would, I'm presenting this because as we pay down the financial obligation this number is going to get smaller sized. So, this number is getting smaller, let's state eventually this is only $300,000, then my equity is going to get bigger.
Now, what I have actually done here is, well, really prior to I get to the chart, let me actually show you how I determine the chart and I do this throughout thirty years and it passes month. So, so you can imagine that there's actually 360 rows here on the real spreadsheet and you'll see that if you go and open it up.
So, on month zero, 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, 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 mortgage payments yet.
So, now prior to 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 very first mortgage payment that we calculated, 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 gone up by precisely $410. Now, you're most likely 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 extremely, in the start, your payment, your $2,000 payment is mostly interest. Just $410 of it is primary. But as you, and then you, and after that, so as your loan balance decreases 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 mortgage once again. This is my new loan balance. And notice, currently 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, large distinction.
This is the interest and primary portions of our home 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 precise, this is precisely our home loan payment, this $2,129. Now, on that extremely first month you saw that of my $2,100 only $400 of it, this is the $400, just $400 of it went https://dantenhty530.hatenablog.com/entry/2020/09/05/223740 to actually pay for the principal, the real loan quantity.
Most of it opted for the interest of the month. But as I begin paying down 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 better color than that. There is less interest, let's state if we go out here, this is month 198, there, that last month there was less interest so more of my $2,100 actually goes to settle the loan.
Now, the last thing I wish to talk about in this video without making it too long is this idea of a interest tax deduction. So, a lot of times you'll hear financial coordinators or real estate agents tell you, hey, the benefit of purchasing your house is that it, it's, it has tax benefits, and it does.
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, discuss 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 lot of that is interest.
That $1,700 is tax-deductible. Now, as we go even more and further every month I get a smaller sized and smaller sized tax-deductible part of my actual mortgage payment. Out here the tax deduction is in fact really little. As I'm getting prepared to settle my whole mortgage and get the title of my house.
This does not mean, let's state 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 calculate it on the spreadsheet. Let's state 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 state before this, let's state 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 know, 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 price quote. Now, when you say 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 usually owed and just paid $25,000.
So, when I inform the IRS just how much did I make this year, rather of saying, I made $100,000 I say that I made $90,000 because I had the ability to deduct this, not straight from my taxes, I had the ability to subtract it from my income. So, now if I just made $90,000 and I, and this is I'm doing a gross oversimplification of how taxes in fact get determined.