The offer is in at $856,000, and the renovation budget is $50,000, so the whole project costs $906,000. Mark & Karen bring a fixed $500,000 from their home equity line at 7.1%. Paul & Kary cover the remaining $406,000 from three sources that always sum to that number: cash, a bank mortgage, and a family loan they repay at 7.1%. The bank mortgage is capped at 40% of the purchase price, which at $856,000 works out to $342,400. The mortgage starts as a temporary line against assets (a tech refi) and converts to a fixed rate once the purchase settles.
Monthly figures use 30-year amortization. Taxes and insurance are $1,300 per month. The family loan and Mark & Karen's equity line both stay at 7.1% no matter which mortgage rate applies.