Quote:
Originally Posted by Caleb
So if you pay it back (buy out) early, are there any fees?
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No, none for paying off early. Just the standard costs for the re-appraisal and other "buy-out" doc fees (very nominal).
Quote:
Originally Posted by Caleb
$70k profit (your example) seems a bit excessive for a $30k loan. Have you tried a credit union?
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I actually miscalculated that. The percentage is not based on the 2nd appraisal value, but on the delta between the two appraisals.
Example: Initial appraisal is $300,000 like before. They adjust it by 15% to cover their "depreciation margin." Thus, we start at $261,000.00.
The percentage of "their share" is based in part on the amount I draw, initially. I can draw a total of $59,000.00. I did bump it up from $30,000 to $40,000. As a result, the percentage is now 43.2% of the delta between the adjusted initial value ($261,000) in this case, and the resultant appraisal (at the time I buy them out). Say that's $315,000.00 Their "share" would then be ($315,000 - $261,000) * .432 = $23,328.00 + the principal I drew. If it depreciates below $261,000 in the time the contract is active, then I would owe less "principal" money. I don't even think that will happen because if they can project that, they would not accept the loan, initially.
At one point I was considering going up to $50,000.00 in principal, but they told me the percentage would be over 50% in that case. I told them to keep it at $40,000.00.
So, given the above numbers, and if I put away, say, $800.00 a month in a savings account for 8-10 years, I should be able to buy them out completely and get all my equity back. Even if their share comes to $60K to my $40K principal. That's $100K total. I should be able to cover that within 8-10 years.
We'll see. They might still deny me if they think it's not worth the investment. We'll see.