Toyota Prius Forum banner

1 - 4 of 4 Posts

·
Registered
Joined
·
99 Posts
Discussion Starter #1
So here is another way of looking at whether to buy you car for cash or to finance it. You finance the entire car, no down payment, just let the dealer arrange 100% financing of the car through Toyota credit company in the range of 4.5%

So you merely leave the $25,000.00 that you were going to use to buy the car in the bank.

On the day after you buy the car you call several real estate brokers and tell them you would like to buy or make a second deed of trust. One of the brokers you contact tells you that he has a client who recently refinanced their home at an interest rate of 5.5%. They do not want to lose the advantage of this low interest loan, however they find themselves in need of $25,000.00 to improve the house. The appraised value of the house is $235.00 and they owe $140,000. They have what is called a loan–to-value of 60%; or in other words they have a 40% equity of $95,000.00 in their house.

If you loan them the $25,000.00 that they need there remains a $70,000.00 cushion between their first loan and your new second loans of $165,000.00. Their new monthly payment on your loan at 12% interest will be $250.00 per month. The broker arranges the loan to last for three year at which time the entire $25,000.00 will be due you.

If they pay as agreed you are a happy camper who has made $9000.00 over the three years. If they do not pay you put them in foreclosure (see your broker for the procedure) and will get all money due you when the foreclosure is completed and the house is sold at the foreclosure sale.

Now what is OPM?” It is theory of using other peoples money to make money for you. In this case you are using Toyotas money which you borrowed at 4.5% and are loaning it out to someone else at 12%.

The above example is a true to life example at real, attainable rates on a real deal.

Arizona Charlie
 

·
Registered
Joined
·
4 Posts
downside

If the loan defaults, you can foreclose but you also need to pay off the first loan to insure you can get your money. If the first is in default, you will be waiting in-line after the first loan collects what they can. You might end up with nothing.
 

·
Registered
Joined
·
27 Posts
Why would they take a loan from you for 12%?

You can get a home equity line of credit around here for 4% up to 80% LTV.
 
1 - 4 of 4 Posts
Top