# Mark (SDCA) - Response To You Question - Posted by MN~Chicago

Posted by Mark (SDCA) on March 25, 1999 at 10:46:49:

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Mark (SDCA) - Response To You Question - Posted by MN~Chicago

Posted by MN~Chicago on March 24, 1999 at 21:35:14:

Mark:

Here are the figures:

360…12…-400,000…\$4,114.45… -0-

This approximates her mortgage situation.

Buy \$400,000 worth of notes at an 18% yield,
for exercise. Substituting 18 in the above
interest slot, the PV = -\$273,007.12, the cost
of buying the \$400,000 of notes to yield 18%.

The cash flow would be \$4,114.45, which
matches her present mortgage payment…
a wash.

In a perfect world, these notes would
be bought at one point in time. A
simultaneous close would occur where the
mortgage holder accepts the \$400,000 face
value of notes (or \$420,000 to make the
deal work), as collateral, and releases
her house, which becomes free and clear.

A new mortgage of \$275,000 is than made
in order to pay for the notes. At 8%,
her new mortgage payments would be \$2,017.85
instead of the original \$4,114.45.

Her immediate follow-up question, without
skipping a beat, was, why not keep buying
more notes until there is no mortgage?!