Any Help? - Posted by Kim
Posted by Kim on March 26, 2001 at 18:20:33:
Here’s what is being talked in a deal one of my friends is setting up? I told him that I would check this board for some advice.
He is being asked by a home buyer (a co worker) to co-sign for a home mortgage and put down 3% (3,300) on a $110,000 home. The rate let’s say will be 7%. The mortgage payment for that would be around $709. The home buyer though would pay $820 as if it was a mortgage payment based on an 8.5% rate. That extra $110 would be kept by the investor. So far this is a 40% return a year obviously not compounded. $1,320 before tax return with an original $3,300 investment (I think I have this right so far) And when the house is sold or if the home owners want to refinance to get the investor out the door they would have to give the investor 3% of the current value not just the $3,300. So if it’s worth $125,000 in 4 years and they sell the investor would get $3,750.
Basically in short the home buyer want’s to pay an extra 1.5% to the investor for the investor putting down the down payment and co-signing.
(By the way the home owner not the investor will pay all closing costs, inspection fees, taxes, PMI, insurance etc.)
Is there an easier way or better way for the investor to set this up?
Hope I’m not asking too much