Trust Lending makes a loan to Myrna for a renovation project in Minot, ND, on a house that costs $190,000. The terms of the deal include a 65% loan to value (LTV), so she must bring 35% of the price as cash to closing, making the principle loan amount $123,500. The terms of the loan also include a four percent origination fee which is to be paid at closing and a 12 month, interest only note with a 9% rate of interest.
In addition to paying the $4,940 origination fee, Myrna will also fund $66,500 of the purchase with her own cash, or 35% of the purchase price. she will then pay $926 per month to the lender. If Myrna sells the project for $247,000 after 12 months, she would realize a total profit of $40,945 after subtracting the principle of $123,500, the cash contributed at closing of $66,500, the origination points of $4,940, and the aggregate interest payments of $11,115. This amount does not account for renovation costs.