MTG Fight Night: 80-10-10 vs. REX
The tale of the tape:
$1,100,000 Purchase Price $1,100,000
$110,000 Down Payment $110,000
$625,500 First Mortgage $880,000
$364,000 Second Mortgage $N/A
$905,634 Balance @ Month 84 $748,393
$1,263,554 Value of Home @ Month 84 $1,263,554
$404,984 Total P&I Payments $331,934
$358,190 Net Equity @ Month 84 $339,739
In the blue corner, purchasing a home worth $1,100,000 and hailing from Los Angeles, "The Pig" has a 10% down payment and will finance his purchase with an 80-10-10 loan. His first mortgage is a 30-year fixed rate loan of $625,500 at 4.250% (APR: 4.274%) and his second mortgage is a HELOC at Prime + 2.5% (fully-indexed at 5.750%) of $364,000. His second mortgage has interest-only payments for the first 10 years.
In the red corner, fighting out of the City by the Bay, "REX" will use the REX Homebuyer equity share program to match his $110,000 down payment. He will take a fully-amortized 7/1 ARM at 3.500% (APR: 3.277%) for $880,000.
Our assumptions include that the home will appreciate 2% per year, that Prime Rate will not change and that our comparison period is 7 years (84 months). Both fighters go the distance:
- The difference in equity at month 84 is $18,451 more in favor of the piggyback scenario. This takes into consideration that the REX agreement is ended and REX is paid back their initial investment plus their share of the appreciated value of the home.
- The difference in payments made over these seven years is $73,050 less with the REX agreement option.
And the winner is?
Mortgage Loan Originator
NMLS: 22343 CalBRE: 01297944
Cell: 415-367-5959 Fax: 415-366-1590
1058 Redwood Highway, Frontage Road, Mill Valley, CA 94941
RPM Mortgage, Inc - BRE# 01818035 – NMLS# 9472 - CA Bureau of Real Estate, Real Estate Corporation License. Equal Housing Lender.
Rates will only apply for the initial period. The initial period for this program above is seven years. The payment on a 7/1 ARM adjusts after 7 years and annually thereafter. At adjustment, the rate will be the average of the Interbank offered rates for one year, U.S. denominated deposits in the London market (LIBOR) as published in the Wall Street Journal, plus a margin of 2.5%. Rates are subject to a 5/2/5 cap. A 5/2/5 cap may adjust no more than 5 points on the first adjustment, no more than 2 points at any annual adjustment thereafter, but in any event no more than 5 points higher than the rate during the life of the loan. The APR of ARM's may increase after consummation. Loans are for 30 years and are fully amortized. No loan requires a balloon payment. Rates assume a FICO score of 780 or greater for a first lien on a single-family, primary residence. Information is accurate as of this date and is subject to change without notice. Your interest rate and precise loan terms will depend upon the specifics of your transaction. This is not a commitment to lend. Rates are current as of 7/25/14.
HELOC rates are adjustable and tied to Prime Rate as published in the Wall Street Journal, plus a margin of 2.5%. Rates are subject to an 18% lifetime cap. Loans are for 30 years and are fully amortized. No loan requires a balloon payment. Rates assume a FICO score of 780 or greater on a single-family, primary residence. Information is accurate as of this date and is subject to change without notice. Your interest rate and precise loan terms will depend upon the specifics of your transaction. This is not a commitment to lend. Rates are current as of 7/25/14.
Through this innovative new program, FirstREX will typically provide up to half the down payment needed to buy a home. The money from FirstREX is an equity investment, not a loan, which means there are no monthly payments or interest. Instead, FirstREX will receive a share of the change in value of the home, up OR down, when the homeowner decides to sell. REX HomeBuyer Agreements are provided exclusively by FirstREX Agreement Corp. Certain restrictions apply and transaction terms may vary. “FirstREX” is a trademark of FirstREX Agreement Corp., a wholly owned subsidiary of Real Estate Equity Exchange, Inc. California BRE License #01524819. FirstREX is an independent investor and is not affiliated with any bank, lender, or real estate brokerage firm. FirstREX 50 California St., San Francisco, CA 94111