Mario takes a loan from Perfect Lending Group in order to rehab a townhome to resale in Kennesaw, GA. The price of the house is $310,000. Since the lender sets a 75% loan-to-value, Mario will need to put 25% down so the principle amount of the loan will be $232,500. The loan is interest-only, paid monthly, and is for 18 months at 13% interest with 5 points paid at closing.
The borrower must fund a total of $32,400 upon closing to cover the $77,500 down payment in addition to the $11,625 origination fee. The lender will collect $2,519 in monthly interest payments from the Mario. This is calculated by taking the total loan value of $232,500, multiplying that by the 13% interest rate, and then dividing that amount by 12. If Mario sells the renovated project for $434,000 at the end of the 18 month term, his gross profit (not including rehab costs) would be $67,038. This is calculated by taking the sales price ($434,000) and subtracting the principle ($232,500), the origination fee ($11,625), the funds he contributed to closing ($77,500), and the total interest payments ($45,338).