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And we're presuming that it's worth $500,000. We are presuming that it deserves $500,000. That is an asset. It's an asset since it offers you future advantage, the future benefit of having the ability to reside in it. Now, there's a liability versus that possession, that's the mortgage loan, that's the $375,000 liability, $375,000 loan or financial obligation.

If this was all of your assets and this is all of your debt and if you were essentially to offer the possessions and settle the debt. If you sell your home you 'd get the title, you can get the cash and then you pay it back to the bank.

But if you were to unwind this deal instantly after doing it then you would have, you would have a $500,000 home, you 'd settle your $375,000 in debt and you would get in your pocket $125,000, which is exactly what your initial deposit was but this is your equity.

However you might not assume it's consistent and have fun with the spreadsheet a bit. But I, what I would, I'm introducing this due to the fact that as we pay for the debt this number is going to get smaller. 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've done here is, well, actually prior to I get to the chart, let me in fact show you how I determine the chart and I do this throughout 30 years and it goes by month. So, so you can picture that there's really 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 don't show here, you borrowed $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 mortgage so I make that first mortgage payment that we determined, that we computed 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 actually gone up by exactly $410. Now, you're most likely saying, hello, gee, I made a $2,000 payment, an approximately a $2,000 payment and my equity just went up by $410,000.

So, that really, in the beginning, your payment, your $2,000 payment is primarily interest. Only $410 of it is principal. However as you, and after that you, and then, 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 mortgage again. This is my new loan balance. And notice, http://trevorvavw202.theglensecret.com/how-to-rent-out-a-timeshare 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 a real, substantial difference.

This is the interest and principal 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 observe, this is the specific, 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, only $400 of it went to in fact pay down the principal, the real loan amount.

Many of it opted for the interest of the month. But as I begin 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, there, that last month there was less interest so more of my $2,100 in fact goes to pay off the loan.

Now, the last thing I want 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 monetary planners or realtors inform you, hey, the benefit of buying 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 extremely clear with what deductible methods. So, let's for circumstances, discuss the interest fees. So, this entire 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 monthly I get a smaller and smaller tax-deductible portion of my actual home loan payment. Out here the tax deduction is in fact extremely small. As I'm preparing to pay off my entire home mortgage and get the title of my house.

This does not mean, let's say that, let's state in one year, let's say in one year I paid, I do not understand, I'm going to comprise 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 say this deductible, and let's state before this, let's say prior to 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 roughly 35 percent on that $100,000.

Let's state, you understand, if I didn't have this mortgage I would pay 35 percent taxes which would be about $35,000 in taxes for that year. Simply, this is simply a rough estimate. Now, when you say that $10,000 is tax-deductible, the interest is tax-deductible, that does not mean that I can just take it from the $35,000 that I would have generally owed and only paid $25,000.