When buying a home using a mortgage that is backed by the FHA, most buyers have mortgages that contain the following: Principal, Interest, PMI and Taxes – when calculating the monthly payment.
Example:
- Purchasing a home with a 30-year mortgage
- Financing the entire amount (for a simpler illustration)
- Full Loan of $100,000
- Interest Rate is 4% Interest
- Property Tax is 1% yearly
- PMI is 0% (for a simpler illustration)
MORTGAGE PAYMENT WITH INTEREST AND TAX
Monthly Payment = $560.75 for 360 months
- Total Interest Paid = $71,869.51
- Total Property Tax Paid = $30,000
- If paid monthly over a 30-year period, the BUYER would have paid a total of $201,869.51 for this home.
MORTGAGE WITH INTEREST, NO TAX
Though you can’t avoid paying TAXES, I would like for you to consider this same purchase without TAXES. Paying just the PRINCIPAL and INTEREST, the BUYER would have paid a total of $171,869.51 for this home.
Monthly Payment WITH INTEREST = $477.42 for 360 months
MORTGAGE WITH NO INTEREST, NO TAX
Monthly Payment = $277.78
Since one cannot avoid paying TAXES, for the two previous monthly payments, the yearly Property Tax would be split between the BUYER and the INVESTORS.
How do INVESTORS benefit? Click the link for OWNERSHIP PERCENTAGE.