Please work this out in excel. Thank you!
You decide to buy a home using the Shared Appreciation Mortgage (SAM) program described at the left. The initial purchase price is $280,000, financed over 30 years at an annualized interest rate of 2.25%, compounded monthly You make a down payment of 10%, which the Lender matches, and pay 2.5 points to get the loan, (2.5% of the loan amount) which is rolled into the total loan amount. DON'T GET FOOLED The Nevw Down Pavment Loans Keith Gumbinger HSH Associates hat if you could get a loan to help make your down payment on a home and not have to pay anything back until you sell the home? additional cost beyond the initial 2.5% fee. On the other hand, if your home appreciates even at the average growth rate of home prices since 1980-about You make no improvements to the home. Determine: a. How much is your portion of the down payment? of tasina cut a loa How much is the monthly payment? Don't forget the nies have started offering. The catch: The lender shares in the profit from any equivalent of taking out a loan with a double-digit interest rate increased value of your home when it's sold. points are included in the borrowed loan amount. You decide to sell after 6 years at a sale price of Other important f c. tors to consider $397,200 i. What is the payoff amount of the loan at 6 years? How it typically works: The finance companies that offer these shared apprecia- tion mortgages (SAMs) include OWN Home Fi- nance...Patch Home... and Unison Homeown- er. Unison, by far the largest player, matches your down payment (typically 10% of the total cost of the in your home that boost its eventual home that you are buying). You pay selling price such as remodeling or an up-front transaction fee of 2.5% of adding a pool? In that case, you apply the amount loaned. When you sell the for a remodeling adjustment when you home, you must pay back the initial loan are selling your home (or at the 30-year amount plus a percentage-35% for a mark). The appraisal at the time of sale total down payment of 20%-of any (rather than how much you actually spent price appreciation of your home since on the improvements) also determines the loan was made. If the home's value the value of your improwements. stays the same from the time you buy What if you want out of the dealt? it to the time you sell it, you simply pay Some SAMs allow you to buy out the back Unison's initial loan amount. If the finance company after three years by home loses value, you pay back the loan paying back the loan plus the originally amount minus 359 or the percentage agreed-upon share of any increase in agreed upon) of the decrease in value. home value. What if you don't plan to sell? Thirty years after the loan is made, even if you still live in the home, you must repay the initial loan along with the agreed-upon share of any price appreciation. What if you make capital investments (Use the +cumprinc function in Excel, check using the Amortization Spreadsheet on D2L) ii. What would your split of the profit be assuming the 35% shared appreciation split to the lender? If the 35% split to the lender is assumed to be interest, what is the effective interest rate on the loan? Points paid are considered interest too! (Use the +cumipmt function) You can use What If?, Solver, trial and error, or divine guidance to get the answer! What is the rate of return of the investment cash flow including the monthly mortgage payments? iii. iv. . What is the rate of return assuming that the monthly mortgage payments = what you would pay to rent a comparable house? Le. do not include the monthly payments in the calculation. You have to live some where! Is this a good deal? My take: SAMs can be attractive if you expect your home to have very lit- nger, vioa prsaidant te or no appreciation in value-in that case, a SAM gives you a loan at no tion, Riverdele, New Jereey, HSH.com at HSH Associates, which pubishes mortgage and oorsumer-loan intorma- vi. BottomLinePERSONAL February 15, 2018
