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We have an employee who bought a house last year. He was thrilled that he would be getting cash back at closing. He was getting his deposit back.
But what he didnt and still does not realize is that he is paying for that deposit for 30 years. And at a very high interest. The price of the house was $335,000, he borrowed 106% ; so if my memory is correct, his mortgage is $350,000. He does not have PMI ; because one loan is for 80%, theother is for 26% or so. One loan is 8%, other is 10%.
I am just waiting for to come crying to me that he is in foreclosure. His credit is terrible. His mortgage is over $3000 per month. Which is 3 times what his rent was. His mortgage broker told him he could refinance in a year and cut the payment. But what she didnt forsee, was that realestate prices in NY stopped climbing and have dipped.
Oh well, he should have listened to me years ago when he could have bought a house for around $100,000.
d
Well he didn't listen to you, but I wouldn't be waiting for him to foreclose. I have never foreclosed on a home, but I could never imagine what that feels like. There are some "I told you so's that just aren't worth it" IMO.
We have an employee who bought a house last year. He was thrilled that he would be getting cash back at closing. He was getting his deposit back.
But what he didnt and still does not realize is that he is paying for that deposit for 30 years. And at a very high interest. The price of the house was $335,000, he borrowed 106% ; so if my memory is correct, his mortgage is $350,000. He does not have PMI ; because one loan is for 80%, theother is for 26% or so. One loan is 8%, other is 10%.
I am just waiting for to come crying to me that he is in foreclosure. His credit is terrible. His mortgage is over $3000 per month. Which is 3 times what his rent was. His mortgage broker told him he could refinance in a year and cut the payment. But what she didnt forsee, was that realestate prices in NY stopped climbing and have dipped.
Oh well, he should have listened to me years ago when he could have bought a house for around $100,000.
d
The question comes down to.. does he make enough money to make $3K a month in mortgage payments? Does his wife?
In my situation, I've taken the cash back I received and make more money on interest then I pay on the mortgage.. Borrowing money at a lower interest rate then you pay is smart.
If your employee gets into financial trouble, it wont be over the 6% cash back he received, it'll be because he bought to much house.
If there is no agreement from the seller/lender, then it is considered illegal.
Just to suggest that you will not notify the lender (who is lending the money), and HUD/RESPA (who regulate lending transactions), then it is considered illegal
[SIZE=3]To understand what RESPA prohibits, you must grasp and thoroughly digest the definition of an illegal kickback. Section 8(a) of RESPA states:[/SIZE] “No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.”
There are three elements to an illegal kickback: (1) a “thing of value,” (2) an “agreement or understanding,” and (3) a “referral.” If any of these three essential elements is missing, the activity is not illegal under RESPA. Section 14 of HUD’s Regulation X12 defines each of these three elements:
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