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Instant Qualifier for Hard Money Mortgage
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We recommend you read the notes below before you use this spreadsheet.
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We also recommend you print this page and refer to it as you use this spreadsheet.
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Enter the amounts highlighted in yellow.
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You can change the mortgage multiplier, safe LTV rate and interest rate multipliers if you wish. These are highlighted in red.
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WHAT THE MULTIPLIERS MEAN
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Allowing for giving second mortgages (mortgage multiplier)
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We do NOT recommend originating second mortgages. But there are times when it might be attractive.
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Here's how to minimize your risk.
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First you need to calculate the TOTAL mortgage you would give on this property.
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From this of course you need to subtract the amount of the first mortgage.
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But we recommend being a little more conservative than this. We multiply this first mortgage amount by 1.5
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to provide a safety zone if we have to make the first mortgages payments while foreclosing the mortgage.
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Example:
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Assume the property would qualify for a total mortgage of $80,000, If this was a first mortgage.
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BUT the borrower is getting or already has a first mortgage of $30,000. Would you want to lend the difference, that is $50,000?
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We think not. Instead we multiply the first mortgage amount, $30,000, by 1.5. This is $45,000. NOW subtract
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$45,000 from $80,000 to get the amount you should loan. That is, loan $35,000.
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Want to be more conservative about writing behind a first mortgage? Then increase the multiplier from 1.5.
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Want to be less conservative about writing behind a first mortgage? Then reduce the multiplier from 1.5.But it should NEVER be less than 1.0.
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Or just DON'T make second mortgages!
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Loan to Value Ratio multipliers
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CREDIT HISTORY
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We allow a safe LTV for terrible credit of 60%. You can increase or reduce this as you wish.
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Want to be more or less conservative about the LTV, perhaps this is commercial or vacant land? Just change the number.
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We increase the safe LTV by adding on the 0 to 10 credit rating. You can increase or reduce that if you wish.
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For example: If the borrower has a credit rating of 5 we increase the maximum LTV allowed from 60 to 65%.
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Want to be more or less conservative about the effect of the credit rating on the LTV? Just change the Multiplier from 1.
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Example:
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If you set this multiplier at 1.5 then in the above scenario you would allow an LTV of 60 + 7.5 = 67.5%.
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If you set this multiplier at 0.5 then in the above scenario you would allow an LTV of 60 + 2.5 = 62.5%.
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DOWN PAYMENT
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We also increase the LTV based on the percentage CASH down payment made by the borrower. We feel someone who has
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put down, say 20% CASH, is much less likely to walk away from the loan than someone with NO CASH INVESTED.
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So if you would loan 65% with zero cash down, we think you should lend 75% with 10% cash down, other things being equal.
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Of course, make sure you NEVER loan more than the value of the property.
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Interest Rate Multipliers
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We reduce the base interest rate from 15% by a multiplier of the credit rating. You can change the base interest rate
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and this multiplier.
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For this example: if the borrower has perfect credit (10) then we reduce the interest rate from 15% to 10%.
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If however you change the Interest Rate Multiplier to 10 then under the same circumstances the interest rate
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would only go down from 15% to 14%.
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Likewise, if you change the Interest Rate Multiplier to 1, then, under the same circumstances the interest rate
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would go down from 15% to 5%.
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The interest rate will also go down if the down payment goes up due to the reduced risk to the lender.
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The Interest Rate Down Payment Multiplier will control the effect of this.
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Lastly, we believe that second mortgages should have a higher interest rates than first mortgage. You can set the amount by how much more.
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Remember to always stay within any laws governing predatory lending rates or usury rates!
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LEARN how to use this spreadsheet by starting with a 0 prior mortgage (you are then loaning a first mortgage),
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keep the base LTV at 60%, credit rating at 0 and the two credit score multipliers as they are set.
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Then seen the effect of having a first mortgage balance and of changing the credit rating of the borrower.
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Then try different multipliers and see the effect they have.
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Fair market value of property:
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Balance of existing PRIOR mortgages that will remain on property:
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Do NOT include mortgage that will be paid off with this new loan
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Cash buyer will be putting down
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Rate borrower credit from 10 for excellent to 0 for terrible:
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How many months to amortize loan over:
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(enter 2,000 for interest only)
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How many months before loan is paid off:
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(the same as above on normal, fully amortizing mortgage loan)
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We suggest you loan for a maximum of 120 months = 10 years.
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60% safe LTV for worse credit before adding corrections below.
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Multiplier of credit rating for calculation of LTV. (set it from 0.5
to 2) |
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Multiplier of mortgage that will remain prior to you that you subtract from loan amount
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Add to LTV depending on % cash down
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New mortgage that would be safe to give:
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(Go no further if amount is negative)
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But you may want to make sure total mortgage not more than price paid for property.
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Loan expenses based on Florida USA:
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Points:
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Title charges:
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Government recording fees and taxes:
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Misc other charges (e.g. courier fees, doc. prep)
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Survey (if needed)
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Appraisal (if needed)
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TOTAL APPROXIMATE LOAN CHARGES:
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NET CASH TO BORROWER:
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INTEREST RATE CALCULATIONS
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Nominal base interest rate for terrible credit.
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Credit score multiplier to determine interest rate. We use 2.0.
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Can be anything from 1 to 10. A value of 10 will minimize the reduction of interest rate to a borrower with a better credit rating.
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A value of 1 will maximize the pro-rata reduction of interest rate to a borrower with a better credit rating.
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Down payment multiplier to determine interest rate. We use 2.0.
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Can be anything from 1 to 10. A value of 10 will minimize the reduction of interest rate to a borrower with a higher down payment.
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A value of 1 will maximize the pro-rata reduction of interest rate to a borrower with a higher down payment.
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Premium interest rate if loan a second mortgage.
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The amount by which the interest rate goes up if this is a second mortgage. We use 1.3
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Caution. Do not exceed predatory lending law or usury law rates.
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Nominal interest rate p.a.
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Monthly payments:
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Balloon amount (if any):
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Amount financed
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Total of payments
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Finance charge
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Annual Percentage Rate (APR)
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For an accurate APR statement use the one used by the government regulators,
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see our web site.
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This is intended to give you an approximate idea of the size of loan the property can qualify for,
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the likely loan charges and the interest rate and monthly payments.
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It is not intended as a legally binding offer of financing or loan approval.
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It is not intended to replace Federal Truth in Lending or Good Faith Estimate
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This spreadsheet is copyright 2004 Mortgage-investments.com, Inc.
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It may be used, reproduced and given away free of charge provided it is not
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altered in any way and remains intact, including this Copyright notice.
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We accept no responsibility for the outcome of any loan you or your clients
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make based on the recommendations of this spreadsheet.
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Nor do we guarantee the accuracy of the calculations.
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