Question about holding the mortgage?

The way that mortgages work is according to an amortization schedule. In a normal mortgage, Interest accrues each month. Each monthly mortgage payment contains a combination of principal and interest (P&I). The payments made at the beginning of the mortgage contain mostly interest whereas the payments at the end of the mortgage contain mostly principal. The Principal is gradually reduced every month over the term of the loan (15 years in your case).

I have put together an amortization schedule based on the information you gave me:

o Principal Balance = $775,000

o Interest Rate = 6%

o Term = 180 monthly payments (15 years)

According to my amortization schedule, the monthly payment that you would receive would be $6,540 ($6,539.89 to be precise) every month for 15 years. The first month's payment is made up of $3,875 of Interest and $2,665 of Principal.

After 12 months of payments, the Principal Balance would be $742,127 (not $703,000). Remember, the Interest accrues on whatever the outstanding Principal Balance is every month. As the lender, you will have earned $45,606 in Interest alone during Year 1 (and you will have received $32,873 back on what you are owed during Year 1).

Good luck!

PS - To answer your followup question, yes, the monthly P&I payment of $6,540 is always the same throughout the term of the loan (assuming it is a normal Fixed Rate loan as opposed to an Adjustable Rate Mortgage or ARM). The word "mortgage" itself means "dead payment" which means that the payment does not go up or down throughout the life of the Fixed Rate loan.

One other thing you should think about as a lender is "escrow." Escrow involves charging the borrower a monthly installment to pay the property taxes and insure the property against fire, wind, flood and other physical damage. As a lender, you would not make money from the escrow funds (they belong to the borrower) but it would enable you to ensure that the taxes are being paid (so that the county does not repossess the property) and the property is properly insured (so that you lose your investment in case of fire, etc.). In order to charge escrow, estimate what the yearly property taxes and insurance premiums will be. Add them together and divide by 12. This is the monthly amount you should charge the borrower.

For example, if property taxes are $14,000 per year and the insurance policy costs $10,000 per year, the total is $24,000. That amount divided by 12 months is $2,000 per month. Therefore, the borrower would have to pay you $6,540 in P&I and $2,000 in Escrow every month (a total payment of $8,540). Again, the escrow money is not yours; you are holding it for the borrower to ensure that his taxes and insurance are properly paid. If you choose to hold these escrow funds, you are liable for paying the taxes and insurance; you may not spend the money on anything else. You would need a separate bank account in which to hold the funds on behalf of the borrower.

i would not except it became into one in all my infants and that i became into keen to basically provide it to them if the indoors maximum loan went south. ought to get exceedingly complicated if the purchasers do no longer pay. And in the event that they could't locate the money for to pay for the land, how can they locate the money for to pay to construct a house?