Impact of points on "loan proceeds"
Hi guys! Hoping I can get some help here, would really appreciate it!
In one of the models on adventures in cre website, the purchase price inputed is $12,000,000. With closing costs, all in purchase cost is $12,360,000. Interest rate of loan is 4%, ltv is 65%, points paid is 1 and loan proceeds mentioned is 7,722,000. Can anyone explain to me what is "loan proceeds" is? Is that the amount the lender funds and that is starting loan balance for the borrower?
I was thinking that points paid (1% of loan amount) will be reduced from the purchase price and that will be loan proceeds, but the math does not add up here. Would really appreciate any help! Thank you!
.65 x 12M x .99 = 7.722M
Hi, thank you! And why .99? So, is the starting loan balance 7.722M or 7,800,000M?
Points paid is part of the closing cost
In many cases, a lender will quote you on the actual purchase price rather than the all-in cost (purchase + closing costs), where the closing costs are a brokerage and some legal fee
So $12m * 65% = $7,800,000 The loan proceeds are $7,800,000 but they deduct 1 point ($78,000), so consider it net proceeds
Hey, thank you!, so what do you think the starting loan balance that the borrower will start paying down be in this scenario?
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