Author Topic: Mortgage Note: How to calculate on Net Worth?  (Read 613 times)

SwordGuy

  • Walrus Stache
  • *******
  • Posts: 7607
  • Location: Fayetteville, NC
Mortgage Note: How to calculate on Net Worth?
« on: August 29, 2018, 05:13:21 PM »

I'm about to sell a property using owner financing.

After the down payment and closing costs are paid, the buyer will owe $158,400.    6% simple interest for 3 years, then a balloon payment for the full amount.  No prepayment penalties.   

Intent is to bridge the gap whilst the buyer sells their old home and does the necessary repairs to the property to move in.  Once they do that, they will refinance.  So, basically, I'll make some interest on top of the sales price.

Don't need a discussion of risk, etc.  I've got a good handle on that.


So, how do I calculate the value of the note for Net Worth purposes?



MDM

  • Senior Mustachian
  • ********
  • Posts: 10473
Re: Mortgage Note: How to calculate on Net Worth?
« Reply #1 on: August 29, 2018, 05:38:30 PM »
After the down payment and closing costs are paid, you will have an investment worth $158,400. 

As that debt is paid, your investment value will decrease but (presumably) the income from debt repayment will find its way into other assets.

tralfamadorian

  • Handlebar Stache
  • *****
  • Posts: 1221
Re: Mortgage Note: How to calculate on Net Worth?
« Reply #2 on: August 29, 2018, 05:51:55 PM »
So, how do I calculate the value of the note for Net Worth purposes?

$158,400 for the duration of the loan since the payments are interest only or the ARV of the property minus foreclosure and reselling costs, whichever is less.