Читать книгу Flipping Houses For Dummies - Ralph R. Roberts - Страница 89

When considering any type of loan, carefully examine interest rates and other factors to determine what’s best overall and which loan is most suitable for your situation. An interest-only loan may offer lower monthly payments, but it may not be the best choice. A fixed-rate loan at a slightly higher interest rate may be better.

The best way to compare loans is to determine the total cost of the loan over the life of the loan:

1 Start with the amount the bank charges you upfront in loan origination fees, discount points (interest you pay upfront — typically, a percentage of the loan, to lower the interest rate), and other fees.

2 Multiply the monthly payment times the number of months you plan to pay on the loan.

3 Add the two amounts to determine your total payment.

4 Total the amount of each payment that goes toward paying the principal of the loan. (Your lender can tell you how much of each payment goes toward principal.)

5 Subtract the total you determined in Step 4 from the total in Step 3.

Suppose you’re considering two loans, each for $100,000. You plan on using the loan to buy and renovate a home over two years and then sell it and pay off the remaining principal on the loan. You have a choice between a 30-year, traditional fixed-rate mortgage at 6 percent and a 30-year, interest-only loan at 5 percent. Look at the 6 percent, fixed-rate mortgage first:

Loan origination fee and discount points:	$1,000.00
Plus monthly payment of $599.55 multiplied by 24 months:	$14,389.200
Equals total payment:	$15,389.20
Minus total paid toward principal:	$2,531.75
Equals total cost of loan:	$12,857.45

Here are the numbers for the 30-year, interest-only loan at 5 percent:

Loan origination fee and discount points:	$1,000.00
Plus monthly payment of $416.67 multiplied by 24 months:	$10,000.008
Equals total payment:	$11,000.08
Minus total paid toward principal:	$0.00
Equals total cost of loan:	$11,000.08

If you’ve ruled out interest-only loans because you think you’ll save money by paying down the principal, the numbers compel you to reconsider. With the traditional mortgage, you’re not only paying more than $180 more every month, but by the time you sell the house, you’ve paid $1,800 more for the privilege of borrowing the money!

As a general rule for quick flips, opt for loans with low (or no) closing costs, low (or no) discount points, and low interest rates. Avoid any loans that have prepayment penalties.