Financing question

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Nov 11th, 2020 8:55 am

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Nov 10th, 2020 12:03 pm

blacd9 [OP]: Newbie; Jul 7, 2017; 19 posts; 15 upvotes

Nov 10th, 2020 12:03 pm

Financing question

Hi,

I am hoping someone could help clarify how my TDS/borrowing capacity would be affected if I financed a $40,000 purchase of private shares from my company at 3.45% that return a dividend of 20% per year rather than paying cash. I have the cash available, but I am hoping to scale and finance multiple properties in 2021 so I’m not sure if financing or paying cash is the better option. I currently have no debt.

Thanks in advance!

3 replies

Nov 10th, 2020 3:17 pm

skeet50: Deal Addict; Jan 15, 2017; 4109 posts; 3612 upvotes

Nov 10th, 2020 3:17 pm

What monthly payment would you be looking at on the loan?

Nov 10th, 2020 4:37 pm

blacd9 [OP]: Newbie; Jul 7, 2017; 19 posts; 15 upvotes

Nov 10th, 2020 4:37 pm

skeet50 wrote: ↑ What monthly payment would you be looking at on the loan?

Hi Skeet, basically $115 per month. The repayment terms are as follows:

First three (3) years, no principal payments are required, interest only payment of $115 per month. Starting fourth year, principle paydown of 20% per year for next 5 years until the loan is payed off in full.

Nov 11th, 2020 8:55 am

skeet50: Deal Addict; Jan 15, 2017; 4109 posts; 3612 upvotes

Nov 11th, 2020 8:55 am

So we know then that you have a current liability of $115 a month and a future liability of $782 a month.

Using a stress test rate of 4.79%, the $782 a month liability would reduce your mortgage qualification amount by about $138,000.

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