Using Your Home Equity as a Bank

— Slide 4: How the BLOC Can Be Used —
Let's Look at Another Example

Let's say that you need to purchase a new HVAC system for your home. The total cost is $10,000.

The HVAC vendor offers a financing plan for 60 months at 7.50% APR with a low, monthly payment at: $200.38

The total amount of interest and principal paid over the 60-month term at 7.50%:

Total Payments $12,203
Total Interest Paid $2,203
Total Principal Paid $10,000

Your loan repayment plan would look like this:


Month
Starting
Balance
Monthly
Payment
Interest
Prin
1 $10,000.00 $200.38 $62.50 $137.88
2 9,862.12 200.38 61.64 138.74
3 9,583.77 200.38 60.77 139.61
4 9,443.29 200.38 59.90 140.48
57 789.15 200.38 4.93 195.45
58 593.70 200.38 3.71 196.67
59 397.03 200.38 2.48 197.90
60 199.13 200.38 1.24 199.13
Total: $12,203 $2,023 $10,000
In this example:

An amortization schedule is calculated that shows that the borrower must pay $200.38 each month for 60 months in order to meet the interest obligation and to pay down the borrowed amount to $0 over 5 years.

The interest charges for the first month is calculated as such:

$10,000 X 7.50% (divided by) 12 months = $62.50

In the first payment, the borrower pays the lender $62.50 in interest. The remaining amount of $137.88 will repay the loan and reduce the borrowed amount to $9,862.12.

The interest charges for the second month is calculated as such:

$9,862.12 X 7.50% (divided by) 12 months = $61.64

In the second payment, the borrower pays the lender $61.64 in interest. The remaining amount of $138.74 will repay the loan balance and reduce the borrowed amount to $9,583.77.

This will continue all the way through the 60th payment, where the borrower pays the lender $1.24 in interest. The remaining amount of $199.13 will repay the loan balance and reduce the borrowed amount to $0. The loan obligation has been paid off.

 

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