Mortgage Lender in Cortland (888) 464-8732

What questions should I ask a mortgage lender in Cortland ? If you’re dealing with a mortgage broker there’s some questions that you should ask both on your first meeting with the mortgage broker and throughout working with your mortgage broker to make sure that you’re getting the best service possible.

USDALoanInfoNewYork is going to go through 10 different questions that you can ask your mortgage lender in Cortland. Be aware that your USDA Loan or Mortgage broker  will be getting the loan that you need and the service that you want.

The first question that I think everyone should ask a mortgage broker is a pretty straightforward one.

How Much Will a Mortgage Broker Cost?

Most mortgage lenders in Cortland actually work for free.

So it doesn’t actually cost you anything in order to do it.

They get money because they are paid by the banks when you successfully get a loan.

So they get a small commission of the loan that you apply for and if you get it.

USDA Sub-Prime Loans - Are They For Real?

So most mortgage brokers in Cortland will work for free and it won’t cost you anything.

However, there are some mortgage brokers out there who do require deposits or who do require you to pay.

So, it’s important to ask, “How much will this cost me?” when assessing which mortgage broker you want to go with.

How much do Mortgage Lenders earn in commission from me and from my loan?

This is less to understand exactly how much they make.

You can see what percentage of commissions they make and things like that by visiting USDALoanInfo.

But it’s more to understand whether or not they’ll be willing to give you this information.

A transparent mortgage broker is someone that’d be willing to give you this information and you know that they have your best interest at heart.

10 Questions You Should Ask Your Mortgage Broker (Ep268)

If they skirt around this issue and they don’t tell you how much they earn.

Well then that would send out red flags for me because I can’t trust them to put my best interest at heart because there are some circumstances where one loan will earn them more money than a loan that could potentially be better for me but not as good for them.

Subprime Mortgage

So, I’m just trying to establish whether or not this mortgage broker in Cortland is someone that I can trust.

And by asking them the big question, the money question,”How much will you earn from me?” That’s a great way to understand whether or not you can trust the mortgage lender.

So ask that question and see how they respond.

Do Mortgage Lenders Invest Themselves?

Now, I don’t think a mortgage broker has to be a property investor in order for them to be able to get you a good loan and for them to help you successfully invest in property.

Subprime Mortgage

However, if they are interested in property in Cortland, if they do invest themselves, then that is going to go a long way to help you because they understand what it’s like to be in your shoes.

They understand what you’re trying to get out of this and they’ve done it themselves so they can help you miss some of the pitfalls and things like that.

Mortgage Lenders Near Me

If they don’t invest themselves, then I would want to ask them, “Have you worked with many people that invest in property?” Because as mortgage brokers, some of them just work with people who are buying their own home.

First Time Home Buyer BEST MORTGAGE DEALS When Buying a House | First Time Home Buyer Loan Programs

Some of the mortgage lender folk who work with people who are doing particular investment strategies.

So, some might work with people who invest in positive cash flow property or who invest in rural areas, who invest using developments.

How's it going everyone? Matt Leighton, welcome back to another video. In this episode, we are talking mortgages,lending. I'm here with Rich Conlon from Atlantic CoastMortgage. Say what's up Rich. Hi, Rich Conlon, Atlantic Coast Mortgage. Loan Officer. Born and raised in Vienna, Virginia. Love the area. Still live in the area. Just here to help out with my man Matt andhelp answer any questions. Awesome, whenever someone has a mortgage questionfurther than "What is the rate?", I just tell them to talk to Rich. I know a little bit about mortgages. Buttoday we're talking about the top mistake people are making when they're applying fora loan. You see all these loan commercials. It's funny, when we get the primer, one-sheeterson the list of things NOT to do. One of them is like, "Don't go and buy a boat". Don't buy a new car. I'm thinking to myself, nobody in the historyof loans has ever gone under contract and then bought a boat the day after. I'm sure it has happened. But it obviously is not the number one mistakepeople are making when they're trying to buy a home. That's where Rich comes in. Rich, you're on the spot here. What is the number one thing people are doing,that they shouldn't be doing when they're applying for a loan with you guys? It's simple, it's before you even get to contract. It's just waiting until the last minute toget pre-approved. We understand circumstances sometimes that'sjust how it is. The big thing is, after meeting your agent,talking about price ranges and goals, the next step, it can't hurt to just reach outto a lender or two or three and start identifying what you can actually qualify for. That's the best thing. The earlier the better. Main reason is that it allows time to findany potential pitfalls that can come back in the underwriting process a week beforeclosing. Last minute surprises are the worst. Nobody wants that. Getting pre-approved early is always better. It allows time to figure out if there areany extra hoops to jump through. That just gives you better piece of mind. When you're out with your agent. Definitively what you can and can't qualifyfor. In addition, we always like to provide youwith estimates on homes that you're going to go see so when you're looking at them,the wheels are turning. What are my payments going to be like? There's a ton of benefits to getting preapprovedearly, rather than waiting for the last minute. And it is beneficial from the very beginningall the way to settlement. It will make your transaction much more transparent,seamless, and less stressful. It takes a village. And it just helps when everything is linedup. Yeah certainly execution is the number onething. You can look online at how to apply for amortgage, what pitfalls to avoid, how to do this, how to do that. At the end of the day, actually going out,going on your lender's website and getting preapproved. You know when I'm working with buyers, I alwaysask two very important questions. Number one: are you already working with areal estate agent. Very important. I've not asked that in the past and it's comeback to bite me, believe it or not. Well, it's very easy to believe actually. And number two, are you pre-approved witha local lender? If you are looking for homes and you are notpre-qualified, you are not a serious buyer. You are wasting your time. You might say "well, I'll just get a letteronce I write a contract, it's fine". Well, my buyers already have that letter andthey will beat you to the punch and get their offer in before you. Nobody likes to get bad news. You don't want to waste your time fallingin love with something that you ultimately don't qualify for. We find that our clients 99% of the time arepre-approved early just makes your guy's time much more efficient and you know what youcan qualify for. All of your processes are so streamlined justto a T that if you do them, you will get qualified, you will have your letter. The reason you screw up is you go off astray,you don't return calls, you don't return emails. We're a referral-based company so communicationis key. Delivery, setting expectations and obviosulymeeting those expectations. Pre-approvals we can do in as little as 24-hoursand especially in this market. Spring time, summer time, that's what it takes. Speed kills. That's how we like to operate. And communicating to you and your agent sowe can all move quickly. Awesome, there you have it from Rich Conlon,Atlantic Coast Mortgage here in Northern Virginia. If you have any questions about the top mistakeor any mortgage and lending related questions, I'll list Rich's information in the descriptionbelow. Thank you very much for watching. Until next time, create a productive day. Take care.

So I would want to find a mortgage broker who either had that experience themselves or who had clients that they had got similar deals for ’cause that way I know that they can negotiate on my behalf and they can get this deal across the line.

What details do Lenders need from me?

It’s one thing to call up a mortgage broker and just to get an estimate of your borrowing capacity but if you’re going through pre-approval and stuff like that, then you’re going to need to provide the mortgage broker with more in-depth details.

Online Mortgage

You might need pay slips; you might need proof of identity, all of that sort of stuff.

If you ask them up front, “What details do you need from me?” And when you go to your meeting with them you actually provide them with those details, well that just makes things so much easier.

How To Choose A Mortgage Lender When Buying a Home

Remember, a mortgage lender is only paid once the deal goes through and once you actually get financing.

So the easier you make it for them, the more likely you are going to get better service.

What can I do as a client to make this go as smoothly as possible?

You have the goal of getting financed for your property, the mortgage lender has a goal of you getting financed for your property and no one wants it to be difficult.

And so, if you can ask the mortgage broker, “Look, how can I work with you? How can I make things easy for you?” They’re the experts; they know what they’re doing.

They can tell you exactly what they need and then you can work hard to provide that for them so that they can get everything across the line as quickly as possible.

Loan Lenders

You know, I have customers,I deal with customers and even though I’m not a mortgage broker myself, I know that when there’s difficult customers that you don’t want to deal with, it just makes life so much harder and you don’t want to work hard for those people.

And when there’s customers who are really nice to you and who try really hard to help you provide them with the service you provide, you will bend over backwards to do anything you can for those customers to get them across the line, to help them as much as possible.

Mortgage Approval

So, be one of those customers that the mortgage broker wants to bend over backwards to help you because you have their interest at heart as well.

You want to see them get paid.

You want to see them do an easy mortgage so they get paid easily.

And so you can develop a relationship into the future.

Which lenders can I borrow the most from?

Most people go into a mortgage broker looking for the cheapest interest rate possible.

What is the cheapest interest rate I can get? And the fact of the matter is a mortgage broker is likely to show you the banks that will lend you the amount of money you need and will also have the cheapest interest rate as well.

However, they might not showy ou banks that will lend you more money than you potentially need at the moment.

Now, it’s important to ask, “Which lenders can I borrow the most from?” because this will help you to project into the future.

Maybe you don’t need to know that for this loan right now but maybe, in the future, you might need to borrow money again and you know, or roughly my borrowing capacity is this.

Or if you find out which lenders you can borrow more from, and you find that you can actually borrow an extra $300,000, well you might split up your deposit and invest in two investment properties instead of just one.

And so asking them, “Which lenders can I borrow the most from?” is a great question to ask to really understand your position.

Because, yes, interest rate is important but how much you can borrow is also important as well.

Can I see a full list of my borrowing options?

Most mortgage brokers will provide you with, usually, like a top three or sometimes only a top one.

And I always like to think, “Can I see a full list of my borrowing options?”Again, this is less to say you want to go through all of this in minute detail and see.

You’re probably going to still choose from one of the top three ones.

But you just want to see that they’re giving you the full amount of information.

And most mortgage brokers are good people but there are some dodgy mortgage brokers out there who are just trying to get the deal that gives them the biggest commission.

Rural Development Loan

And so by asking to see a full list of what your borrowing options, you can then look at that and you can then assess, “Okay, well which loan do I think is going to be best for me?” rather than just taking the recommendation of the mortgage broker who may or may not be thinking about themselves.

Mortgage Approval

So, again, most mortgage brokers are great people out there to help you but it’s always a good idea to get a full list of your borrowing options that are available.

Will this put a mark against my credit file?

And so this is when you’re trying to work out how much you’re going to borrow and stuff like that.

When you go into a bank and you try and find out how much you can borrow, often, the bank will do a credit check and this puts a mark against your credit file.

And what happens is if you have a lot of these marks against your credit file, even though it’s nothing bad, this can actually stop you getting a loan.

Average Mortgage

So, talk to your mortgage broker and when you’re looking at, “What can I borrow?”or your looking at getting pre-approval, just understand, “Will this put a mark against my credit file?” ‘Cause it’s not bad to have a couple or whatever.

But if you’re getting lots and lots of marks against your credit file, then that could be an issue.

So just make sure and you know when a mark’s being put against your credit file and when a mark isn’t being put against your credit file.

How soon can I revalue or borrow again?

So if you’re investing in a property to renovate it or to develop it or even if you’re investing in a property that’s potentially under market value, you want to know how quickly can you revalue that property so you can get equity and then hopefully draw equity out of the property to go ahead and invest again.

There are a lot of lenders out there who don’t allow you to revalue within a 12-month period.

So, speak to your mortgage broker about the lenders that will allow you to revalue faster.

And basically, this will give you an idea of how quickly you can revalue to consider going again.


You’re also going to want to ask them, “After I invest in this property, how soon can I borrow again or what do I need to do to put myself in a position to be able to borrow again and to purchase the next property?”

Because hopefully, your goal isn’t just to purchase one property but to grow your property portfolio and to achieve that financial freedom and that financial security that you’re striving for.

Will My Loans be ‘cross-collateralised’?

Now, I have heard a lot of stories about investors whose loans have been cross-collateralised and it’s cause major problems when they’ve gone and sold their property because the bank shave been able to take that money and pay off debt.

Rural Development Loan

And basically, you want to avoid this at all costs from what I hear.

And so, it’s good to ask your mortgage broker, “Will my loans be cross-collateralised in any way?” Generally going with the same lender for two loans does it by default, even though it doesn’t say they’re cross-collateralised.

So, it’s just something that you want to look at the fine print, you want to understand, “Are these cross-collateralised?” And if they are, try and avoid it, try and get loans that aren’t going to be cross-collateralised.

Best Home Equity Loan Rates

So there you have some questions to ask your mortgage broker next time you go and see a broker to find out how much you can borrow or get pre-approval or get financed for another property.

If you are in the market, looking at properties and you want to see some high rental yield properties, then I’ve got 10 property listings that I’ve gone out and found for you guys.

You can see what high rental yield properties look like that are likely to generate a positive cash flow.

Did You Know – You Can Get Pre-Approved for a USDA Loan in Cortland?

Home Finance

In 2015 there are several types of different mortgage loans that are available. How do you wade through them to find out which one will be the best option for you? One way is to learn about the pros and cons for each type and then narrow the field from there. To that end, we will discuss a few of them and their pros and cons.Fixed Mortgages vs. Adjustable Rate MortgagesWhen you are looking at taking out a mortgage then you first need to decide whether you want one that has a fixed rate or one that has a rate that is adjustable. Every single type of mortgage will be either one or the other. Incidentally, you might also have a mortgage that combines the two. Here is a quick breakdown of the differences. Fixed Rate loans will have an interest rate that will remain the same for the duration of the loan. Due to this, your monthly payment will remain the same until the loan is completely repaid. Adjustable Rate loans have a rate of interest that can and will fluctuate. In many cases you will have a fixed rate of interest for the first year and then will change on a yearly basis. Loans that have this first 'fixed' period are the hybrid loans. Loans of both types do have their pros and cons just as all things do. A pro for adjustable rate loans is that the interest rate that they begin with is often lower than that of a fixed rate loan. However, the interest rates in the future will vary and this can turn into a con quickly. The monthly payments on an adjustable rate mortgage can and often do rise exponentially the longer they are carried. Alternatively, a pro for the fixed rate loan is that your monthly payment amount will never change. However, due to that the rate of interest is generally higher.Jumbo Loans or Conforming LoansAside from the basic types of loans there is another thing that must be considered. That is the actual size of the loan that you need. The amount of money that you are requesting will put your loan into one of two categories: jumbo loans or conforming loans. What is the difference? Jumbo Loans will be for an amount of money that exceeds the limits for conforming loans that are set forth by the Freddie Mac and Fannie Mae organizations. The lender of these types of loans will have a higher amount of risk than that which is experienced with a conforming loan. However, borrowers for this type of loan must have a credit history that is impeccable and must also come up with a substantial down payment as compared to what is necessary for a conforming loan. Additionally, interest rates for jumbo loans are typically higher when compared to the rates associated with a conforming loan. Conforming Loans are those that meet the parameters set forth by the Freddie Mac and Fannie Mae organizations. Typically these guidelines have to do with the size of the loan. Both Freddie Mac and Fannie Mae are entities that are controlled by the government. They both sell and purchase securities that are backed mortgages. In plain English, they buy the loans from various lenders where they are generated and then they sell those loans to various Wall Street investors. Conforming loans will be those that fall within their regulated size limits as well as those conforming to their other criteria. Now that you have this information, making the decision as to which type you need should be a little easier.

USDA Sub-Prime Loans - Are They For Real?

Mortgage Application

- [Voiceover] What Iwant to do in this video is explain what a mortgage is.

I think most of us have atleast a general sense of it, but even better than that,actually go into the numbers and understand a little bitof what you are actually doing when you're paying amortgage, what it's made up of and how much of it is interest versus how much of it isactually paying down the loan.

Let's just start with a little example.

Let's say that thereis a house that I like.

Let's say that that is the house that I would like to purchase.

It has a price tag of, let's say that I need to pay $500,000 to buy that house.

This is the seller ofthe house right here.

And they have a mustache.

That's the seller of the house.

I would like to buy it.

I would like to buy thehouse.

This is me right here.

And I've been able tosave up $125,000 dollars.

I've been able to save up$125,000 but I would really like to live in that house so I go to a bank.

I go to a bank, let me geta good color for a bank.

That is the bank right there.

And I say, "Mr.

Bank, can you lend me "the rest of the amountI need for that house?" Which is essentially $375,000.

I'm putting 25% down.

This number right here, that is 25% of $500,000.

So I ask the bank, "Can Ihave a loan for the balance? Can I have $375,000 loan?" And the bank says, "Sure.

You seem like a nice guy "with a good job whohas good credit rating.

"I will give you the loan but while you're paying off the loan you can'thave the title of that house.

"We have to have that title of the house "and once you pay off the loan, "we're going to give youthe title of the house.

" What's gonna happen here isthe loan is gonna go to me, so it's $375,000.

$375,000 loan.

Then I can go and buy the house.

I'm gonna give the total $500,000, $500,000 to the seller of the house, and I'll actually moveinto the house myself, assuming I'm using itfor my own residence.

But the title of the house, the document that says who actually owns the house.

This is the home title.

This is the title of the house.

Home title.

It will not go to me.

It will go to the bank.

The home title will go from the seller, or maybe even the seller's bank, because maybe they haven'tpaid off their mortgage.

It will go to the bankthat I'm borrowing from.

This transferring of thetitle to secure a loan.

When I say "secure aloan," I'm saying I need to give something to thelender in case I don't pay back the loan or if I just disappear.

This is the security right here.

That is technically what a mortgage is.

This pledging of the titleas the security for the loan, that's what a mortgage is.

It actually comes from old French.

Mort means dead, andthe gage means pledge.

I'm 100% sure I'm mispronouncing it, but it comes from dead pledge because I'm pledging itnow but that pledge will eventually die once I pay off the loan.

Once I pay off the loan thispledge of the title to the bank will die and it will come back to me.

That's why it's called adead pledge, or a mortgage.

And probably because itcomes from old French is the reason we don't saymort-gage, we say mortgage.

But anyway, this is alittle bit technical, but normally when peoplerefer to a mortgage they're really referringto the loan itself.

They're really referringto the mortgage loan.

What I want to do inthe rest of this video is use a screenshot froma spreadsheet I made to actually show you the math, or actually show you what yourmortgage payment is going to.

You can download thisspreadsheet at khanacademy, khanacademy.

Org/downloads/mortgagecalculator Or actually, even better, justgo to the downloads folder and on your web browseryou'll see a bunch of files, and it will be the filecalled MortgageCalculator, MortgageCalculator.


It's a Microsoft 2007 format.

Just go to this URL, thenyou'll see all the files there and you can just download this file if you want to play with it.

What it does here, in thiskind of dark brown color, these are the assumptionsthat you can input and then you can change thesecells in your spreadsheet without breaking the whole spreadsheet.

Here I've assumed a 5.

5% interest rate.

I'm buying a $500,000 home.

It's a 25% down payment, that's the $125,000 that I had saved up, that I talked about right over there.

And then the loan amount.

Well, I have 125, I'mgonna have to borrow 375, it calculates it for us.

And then I'm gonna get apretty plain vanilla loan.

This is gonna be a 30 year.

When I say term in years, thisis how long the loan is for.

So 30 years.

It's gonna be a 30 yearfixed-rate mortgage.

Fixed rate, which means theinterest rate won't change.

We'll talk about that a little bit.

This 5.

5% that I'm payingon the money that I borrowed will not change over thecourse of the 30 years.

We will see that the amount I've borrowed changes as I pay down some of the loan.

This little tax rate that I have here, this is to actually figureout what is the tax savings of the interest deduction on my loan.

We'll talk about that in a second, you can ignore it for now.

Then these other thingsthat aren't in brown, you shouldn't mess with these if you actually do open up thespreadsheet yourself.

These are automatically calculated.

This right here is amonthly interest rate.

So it's literally theannual interest rate, 5.

5%, divided by 12.

And most mortgage loans arecompounded on a monthly basis so at the end of every monththey see how much money you owe and they will charge you this much interest on that for the month.

Now given all of these assumptions, there's a little bit ofbehind-the-scenes math, and in a future video Imight actually show you how to calculate what theactual mortgage payment is.

It's actually a prettyinteresting problem.

But for a $500,000 loan--Well, a $500,000 house, a $375,000 loan over 30 yearsat a 5.

5% interest rate, my mortgage payment isgoing to be roughly $2,100.

Right when I bought the house, I want to introduce alittle bit of vocabulary, and we've talked about thisin some of the other videos.

There's a asset in questionright here, it's called a house.

And we're assuming it's worth $500,000.

We're assuming it's worth$500,000.

That is an asset.

It's an asset because itgives you future benefit; The future benefit ofbeing able to live in it.

Now there's a liabilityagainst that asset, that's the mortgage loan.

That's a $375,000 liability.

$375,000 loan or debt.

If this was your balance sheet, if this was all of your assetsand this is all of your debt, and you were essentiallyto sell the assets and pay off the debt, if you sell the house you get the title, you can get the money, thenyou pay it back to the bank.

Well actually, it doesn'tnecessarily go into that order but I won't get too technical.

But if you were to unwindthis transaction immediately after doing it, then youwould have a $500,000 house, you'd pay off your $375,000 in debt, and you would get, inyour pocket, $125,000, which is exactly what youroriginal down payment was.

But this is your equity.

The reason why I'm pointing it out now is, in this video I'm notgonna assume anything about the house price,whether it goes up or down, we're assuming it's constant.

But you could not assume it's constant and play with thespreadsheet a little bit.

But I'm introducing thisbecause as we pay down the debt this number's going to get smaller.

So this number is getting smaller.

Let's say at some pointthis is only 300,000.

Then my equity is going to get bigger.

So you could do equity ishow much value you have after you pay off the debt for your house.

If you were to sell thehouse, pay off the debt, what do you have left over for yourself.

This is the real wealth in thehouse, this is what you own.

Wealth in house, or theactual what the owner has.

What I've done here is-- Actually before I get tothe chart let me actually show you how I calculate the chart.

I do this over the course of30 years, and it goes by month.

So you can imagine that there's actually 360 rows here in the actual spreadsheet, and you'll see that ifyou go and open it up.

But I just want to show you what I did.

On month 0, which I don't showhere, you borrow $375,000.

Now, over the course of that month they're going to charge you.

46% interest.

Remember, that was 5.

5% divided by 12.

46% interest on $375,000 is $1,718.


So I haven't made anymortgage payments yet.

I've borrowed 375,000.

This much interest essentiallygot built up on top of that, it got accrued.

So now before I've paidany of my payments, instead of owing 375,000 atthe end of the first month, I owe $376,718.

Now, I'm a good guy, I'm notgonna default on my mortgage so I make that first mortgage payment that we calculated right over here.

After I make that paymentthen I'm essentially, what's my loan balanceafter making that payment? Well, this was before making the payment, so you subtract the payment from it.

This is my loan balance after the payment.

Now this right here, thelittle asterisk here, this is my equity now.

So remember, I startedwith $125,000 of equity.

After paying one loan balance,after my first payment, I now have $125,410 in equity, so my equity has gone up by exactly $410.

Now you're probably saying,"Gee.

I made a $2,000 payment, "roughly a $2,000 payment, "and my equity only went up by $410 "Shouldn't this debthave gone down by $2,000 "and my equity have gone up by $2,000?" And the answer is no because you had to pay all of this interest.

So at the very beginning, your payment, your $2,000 payment, is mostly interest.

Only $410 of it is principal.

So as your loan balance goes down you're going to pay less interest here, so each of your payments are going to be more weighted towards principal, and less weighted towards interest.

And then to figure out the next line, this interest accrued right here, I took your loan balanceexiting the last month, multiplied that times.


You get this new interest accrued.

This is your new pre-payment balance.

I pay my mortgage again.

This is my new loan balance.

And notice, already by monthtwo, $2 more went to principal.

and $2 less went to interest.

And over the course of 360months you're going to see that it's an actual, sizable difference, and that's what thischart shows us right here.

This is the interestand principal portions of our mortgage payment.

So this entire heightright here, this is-- Let me scroll down a little bit.

This is by month.

So thisentire height, you notice, this is exactly our mortgagepayment, this $2,129.

Now, on that very first monthyou saw that of my $2,100, only $400 of it, this is the $400.

Only $400 of it went toactually pay down the principal, the actual loan amount.

The rest of it went to pay down interest, the interest for that month.

Most of it went for theinterest of the month.

But as I start paying down the loan, as the loan balance getssmaller and smaller, each of my payments, there'sless interest to pay.

Let me do a better color than that.

There's less interest.

We goout here, this is month 198, over there that last monththere was less interest, so more of my $2,100 actuallygoes to pay off the loan until we get all the way to month 360.

You can see this inthe actual spreadsheet.

At month 360 my final payment is all going to pay off the principal.

Very little, if anything,of that is interest.

Now, the last thing I wantto talk about in this video, without making it too long, is this idea of a interest tax deduction.

A lot of times you'll hearfinancial planners or realtors tell you the benefit of buying your house is it has tax advantages, and it does.

Your interest is tax deductible.

Your interest, not your whole payment.

Your interest is tax deductible.

I want to be very clearwhat deductible means.

First let's talk aboutwhat the interest means.

This whole time over 30 yearsI am paying $2,100 a month, or $2129.

21 a month.

Now the beginning, alot of that is interest.

So on month one, 1,700of that was interest.

That $1,700 is tax deductible.

As we go further and further, each month I get smaller andsmaller tax deductible portion of my actual mortgage payment.

Out here the tax deductionis actually very small, as I'm getting ready topay off my entire mortgage and get the title of my house.

I want to be very clear on this notion of what tax deductible even means, because I think it ismisunderstood very often.

Let's say in one yearI paid, I don't know, I'm gonna make up a number, I didn't calculate it on the spreadsheet.

Let's say in year one Ipay $10,000 in interest.

10,000 in interest.

Remember, my actual paymentswill be higher than that because some of my payments went to actually paying down the loan.

But let's say 10,000 went to interest.

And let's say before this, let's say before thisI 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 payingroughly 35% on that 100,000.

I won't go into the whole tax structure and the differentbrackets and all of that.

Let's say if I didn't have this mortgage I would pay 35% taxes, which would be about $35,000in taxes for that year.

This is just a rough estimate.

When you say that $10,000is tax deductible, the interest is tax deductible, that does not mean that I canjust take it from the $35,000 that I would have normallyowed and only pay 25,000.

What it means is I can deductthis amount from my income.

When I tell the IRS howmuch did I make this year, instead of saying 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 this is, I'm doing agross oversimplification of how taxes actually get calculated -- and I pay 35% of that, let'sget the calculator out.

Let's get the calculator.

So 90 times.

35 is equal to 31,500.

So this will be equal to $31,500.


Off of a 10,000 deduction,$10,000 of deductible interest, I essentially saved $3,500.

I did not save $10,000.

Another way to think about it, if I paid 10,000 interestand my tax rate is 35%, I'm gonna save 35% ofthis in actual taxes.

This is what people meanwhen they say deductible.

You're deducting it from the income that you report to the IRS.

If there's something thatyou could take straight from your taxes, that'scalled a tax credit.

If there was some specialthing that you could actually deduct it straight from yourtaxes, that's a tax credit.

But a deduction justtakes it from your income.

On this spreadsheet Ijust want to show you that I actually calculated, in that month, how much of a tax deduction do you get.

So for example, just offof the first month you paid $1,700 in interest of your$2,100 mortgage payment, so 35% of that, and I got 35%as one of your assumptions, 35% of $1,700, I will save$600 in taxes on that month.

So roughly over thecourse of the first year I'm gonna save about $7,000 in taxes, so that's nothing to sneeze at.

Anyway, hopefully you found this helpful and I encourage you togo to that spreadsheet, and play with the assumptions, only the assumptions in this brown color unless you really know whatyou're doing with a spreadsheet, and you can see how thisactually changes based on different interest rates,different loan amounts, different down payments, different terms.

Different tax rates, that will actually change the tax savings, and you can play aroundwith the different types of fixed mortgages on this spreadsheet.

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