Section 24.401(d) Increased mortgage interest costs.
The provision in § 24.401(d) sets forth the factors to be used in computing the payment that will be required to reduce a person's replacement mortgage (added to the downpayment) to an amount which can be amortized at the same monthly payment for principal and interest over the same period of time as the remaining term on the displacement mortgages. This payment is commonly known as the “buydown.”
The Agency must know the remaining principal balance, the interest rate, and monthly principal and interest payments for the old mortgage as well as the interest rate, points and term for the new mortgage to compute the increased mortgage interest costs. If the combination of interest and points for the new mortgage exceeds the current prevailing fixed interest rate and points for conventional mortgages and there is no justification for the excessive rate, then the current prevailing fixed interest rate and points shall be used in the computations.
Justification may be the unavailability of the current prevailing rate due to the amount of the new mortgage, credit difficulties, or other similar reasons.
Sample Computation
| Old Mortgage: | |
| Remaining Principal Balance | $50,000 |
| Monthly Payment (principal and interest) | $458.22 |
| Interest rate (percent) | 7 |
| New Mortgage: | |
| Interest rate (percent) | 10 |
| Points | 3 |
| Term (years) | 15 |
Remaining term of the old mortgage is determined to be 174 months. Determining, or computing, the actual remaining term is more reliable than using the data supplied by the mortgagee. However, if it is shorter, use the term of the new mortgage and compute the needed monthly payment.
Amount to be financed to maintain monthly payments of $458.22 at 10% = $42,010.18.
| Calculation: | |
| Remaining Principal Balance | $50,000.00 |
| Minus Monthly Payment (principal and interest) | −42,010.18 |
| Increased mortgage interest costs | 7,989.82 |
| 3 points on $42,010.18 | 1,260.31 |
| Total buydown necessary to maintain payments at $458.22/month | 9,250.13 |
If the new mortgage actually obtained is less than the computed amount for a new mortgage ($42,010.18), the buydown shall be prorated accordingly. If the actual mortgage obtained in our example were $35,000, the buydown payment would be $7,706.57 ($35,000 divided by $42,010.18 = .8331; $9,250.13 multiplied by .83 = $7,706.57).
The Agency is obligated to inform the displaced person of the approximate amount of this payment and that the displaced person must obtain a mortgage of at least the same amount as the old mortgage and for at least the same term in order to receive the full amount of this payment. The Agency must advise the displaced person of the interest rate and points used to calculate the payment.
