Finance Lesson Four

Learning Objectives Understand the different types of financing. Understand how loans are used in the market place.

1/5 Variable Rate Loan - Above Prime - Cap on Interest Bank Borrower 5 6 7 8 9 10 6 7 8 9 10

ARM Adjustable Rate Loan

Index - 6 Month T-Bills Margin - 2.75% $ 150,000 @ 5% = $ 805.23 Payment 8% = $1,100.65 Index - 6 Month T-Bills Margin - 2.75% $ 150,000 @ 5% = $ 805.23 25,000 $ 125,000 @ 5% + 2.75 = 7.75% = $ 895.52 - 25,000 $ 100,000 @ 5.25% + 2.75= 8.00%= $ 733.76 $ 75,000 @ 5.5 % + 2.75 = 8.25% = $ 563.45 $ 50,000 @ 5.25% + 2.75 = 8.00% = $ 366.88 25,000 @ 5.5 % + 2.75 + 8.25%= $ 187.82

Graduated Property Mortgage Example – FHA 245

After 2 Years Loan Balance is $72,136 Original Loan was $70,000 Payment should be $614 $614.00 $614.00 -500.00 -550.00 $114.00 64.00 3rd Year and for Remaining Term $614 x 12 x 12 $1,368.00 $768.00 $1,368.00 2nd Year Payment $550 +768.00 $2,136.00 1st Year Payment $500

Wraparound Mortgage $ 80,000 Selling Price 50,000 Loan Bal. @ 5% 5 year $268.41 $ 30,000 Loan Balance - 20,000 10,000 2nd at 8% $ 73.38 $341.79 $ 80,000 $ 20,000 60,000 at 8% = $440.26

Reverse Annuity Mortgage RAM Property $ 400,000 Pay Out $ 3,000 Per Month - $ 36,000 Year $ 3,000 Per Month - $ 36,000 $ 72,000 $ 400,000 - 72,000 $ 328,000 Left Over

Shared Appreciation Mortgage SAM $ 80,000 SP 8% - 30 Yrs. 587.01 $ 90,000 - 73,982 $ 16,018 : 2 = $ 8,009.00 $ 73,982 – 8,009 = $ 65,973.00 $484.09 P & I

Loan To Value $ 100,000 SP. 20,000 DP. $ 80,000 80% LOAN $80,000 80% $100,000