But you might not presume it's consistent and have fun with the spreadsheet a bit. But I, what I would, I'm presenting this due to the fact that as we pay down the debt this number is going to get smaller sized. So, this number is getting smaller, let's state at some point this is only $300,000, then my equity is going to get larger.
Now, what I have actually done here is, well, really prior to I get to the chart, let me actually reveal you how I compute the chart and I do this over the course of thirty years and it goes by month. So, so you can imagine 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 absolutely no, which I do not show here, you borrowed $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 haven't 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 great guy, I'm not going to default on my home mortgage so I make that first home mortgage payment that we calculated, that we computed 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 first payment I now have $125,410 in equity. So, my equity has actually increased by exactly $410. Now, you're most likely stating, hi, gee, I made a $2,000 payment, a roughly a $2,000 payment and my equity just 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. But as you, and after that 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 mortgage once again. This is my new loan balance. And notification, currently by month two, $2.00 more went to principal and $2.00 less went to interest. And over the course of 360 months you're going to see that it's an actual, sizable distinction.
This is the interest and principal parts of our home loan payment. So, this whole height right here, this is, let me scroll down a bit, this is by month. http://timando66w.nation2.com/how-to-get-timeshare So, this entire height, if you notice, this is the exact, this is precisely our 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, only $400 of it went to actually pay down the principal, the actual loan amount.
Many of it opted for the interest of the month. However as I begin paying down the loan, as the loan balance gets smaller sized and smaller, 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 state 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 deduction. So, a great deal of times you'll hear monetary organizers or real estate agents tell you, hey, the advantage of buying your home 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 instance, speak about the interest charges. 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 even more and further monthly I get a smaller sized and smaller sized tax-deductible portion of my real home mortgage payment. Out here the tax deduction is really really little. As I'm preparing to settle my whole mortgage and get the title of my house.
This doesn't mean, let's say that, let's state in one year, let's state in one year I paid, I don't understand, I'm going to make up 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 say $10,000 went to interest. To state this deductible, and let's say prior to 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 say I was paying roughly 35 percent on that $100,000.
Let's say, you understand, if I didn't have this mortgage 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 price quote. Now, when you state that $10,000 is tax-deductible, the interest is tax-deductible, that does not imply that I can just take it from the $35,000 that I would have usually owed and only paid $25,000.
So, when I tell the Internal Revenue Service just how much did I make this year, instead of saying, I made $100,000 I state that I made $90,000 since I was able to subtract this, not directly from my taxes, I was able 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 calculated.