PROCEEDS STRATEGY
The Lending Collective
Proceeds Strategy
Don't put it all down
Almost every seller assumes the whole check from the old house belongs in the new one. Meanwhile two car notes and a pile of credit card debt come along for the ride. A dollar of mortgage debt costs you a fraction of what a dollar of consumer debt costs every month — so the same money does more work paying off the expensive stuff.
Loaded with example numbers. Replace them with yours.
The sale & the purchaseStart here
$
After paying off the old mortgage and agent commissions.
$
%
yrs
$
Closing costs, prepaids, escrows.
%/yr
Applies only above 80% loan-to-value.
Debt you're carryingBalance & monthly payment
Cost per $1,000 borrowedMonthly
This is the whole argument. Every $1,000 of mortgage debt costs a few dollars a month. Every $1,000 on a credit card costs several times that. The circled bar is your most expensive money — it's the one your proceeds should be aimed at.
How much to put downStrategy B
10%Down payment
3%40%
The two strategiesMonthly household outgo
—
Lower every month by paying off debt instead
Mortgage P&I
Mortgage insurance
Consumer debt
| A — All down | B — Pay off debt | |
|---|---|---|
| Down payment | — | — |
| Loan amount | — | — |
| Loan-to-value | — | — |
| Mortgage P&I | — | — |
| Mortgage insurance | — | — |
| Consumer debt payments | — | — |
| Monthly outgo | — | — |
| Debt paid off at closing | — | — |
| Cash left in reserves | — | — |
Enter your numbers to see the comparison.
Run this on your actual file
Every lender has limits on how low a down payment can go, and paying off debt at closing has rules of its own. Let's find out what your file will actually support.
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