But you could not presume it's consistent and play with the spreadsheet a bit. However I, what I would, I'm presenting this since as we pay for the financial obligation this number is going to get smaller. So, this number is getting smaller sized, let's say 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, in fact prior to I get to the chart, let me http://riverfqiu528.bravesites.com/entries/general/how-to-get-out-of-westgate-timeshare really show you how I determine the chart and I do this over the course of 30 years and it goes by month. So, so you can imagine that there's really 360 rows here on the real spreadsheet and you'll see that if you go and open it up.
So, on month no, which I do not reveal here, you borrowed $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, rather of owing $375,000 at the end of the very first month I owe $376,718. Now, I'm a great person, I'm not going to default on my mortgage so I make that first home mortgage payment that we calculated, that we calculated right over here.
Now, this right here, what I, little asterisk here, this is my equity now. So, keep in mind, I began 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 gone up by precisely $410. Now, you're probably saying, hi, gee, I made a $2,000 payment, an approximately a $2,000 payment and my equity only increased by $410,000.
So, that really, in the start, your payment, your $2,000 payment is mostly 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 brand-new prepayment balance. I pay my mortgage once again. This is my new loan balance. And notice, already by month two, $2.00 more went to primary and $2.00 less went to interest. And throughout 360 months you're going to see that it's a real, large difference.
This is the interest and primary portions of our mortgage payment. So, this entire height right here, this is, let me scroll down a little bit, this is by month. So, this entire height, if you notice, this is the specific, this is precisely our home loan payment, this $2,129. Now, on that very first month you saw that of my $2,100 just $400 of it, this is the $400, just $400 of it went to really pay down the principal, the actual loan quantity.
Most of it opted for the interest of the month. But as I start 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 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 settle the loan.
Now, the last thing I desire to discuss in this video without making it too long is this concept of a interest tax deduction. So, a lot of times you'll hear monetary coordinators or real estate agents tell you, hey, the benefit of purchasing your home is that it, it's, it has tax benefits, and it does.
Your interest, not your entire payment. Your interest is tax deductible, deductible. And I wish to be very clear with what deductible ways. So, let's for circumstances, discuss the interest fees. So, this entire time over 30 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 further and further every month I get a smaller sized and smaller tax-deductible part of my actual home loan payment. Out here the tax deduction is in fact really small. As I'm preparing to settle my whole mortgage and get the title of my house.
This doesn't suggest, let's state that, let's say in one year, let's say in one year I paid, I don't know, 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 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 approximately 35 percent on that $100,000.
Let's say, you understand, if I didn't have this home loan I would pay 35 percent taxes which would be about $35,000 in taxes for that year. Just, 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 imply that I can just take it from the $35,000 that I would have usually owed and just paid $25,000.
So, when I tell the Internal Revenue Service just how much did I make this year, rather of saying, I made $100,000 I state that I made $90,000 because I had the ability to subtract 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 actually get determined.