As discussed SIMP is the first highly modifiable software based amortization model. The demo we are about to review was optimized with to consider borrowers will either sell or refinance their homes within 10 years. In this example we have optimized SIMP to reduce principal at approximately the same pace as the 15 year show them please refer to column X . 15 year mortgage reduces the principal balance of a loan by 10 % in just over 2 years, now lets take a look at SIMP please go to column K as you can see it takes SIMP a few months more. There is one major caveat of the 15 mortgage I would like to go over , please refer to cell B10 as you can see SIMP monthly payment is $161 less than the 15 year, thus SIMP borrowers will have
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Based on a 35% tax bracket the after tax revenue stream of SIMP is $509 please refer to cell J1 VS the 30-Year which is $424 please refer to cell T12 SIMP’s the after tax revenue stream is $72 a month higher, this gives lenders $72 a month more revenue over 10 years to reinvest due to the fact SIMP borrowers monthly payments are composed of $100% principal oppose to 90% interest, in the case of the 30-year model.
How do we quantify how much more yield SIMP would receive due to having $72 more dollars each month to reinvest over 10 years? Well one way would be to SIMPly add this amount to our present revenue stream. Please refer to cell J3 SIMP’s effective 10 year yield average would be 6.93%. SIMP produces .93 basis points higher yield at half the risk of a 30 year mortgage. Given SIMP plenty of cushion against yield spread volatility.
So how does SIMP benefit the borrower? Please view cell K8. In 10 years SIMP delivers $25,414 more equity, twice the amount of equity it would have received under the 30- year model and cut the term of the loan from 30 to 20
Based on a 35% tax bracket the after tax revenue stream of SIMP is $509 please refer to cell J1 VS the 30-Year which is $424 please refer to cell T12 SIMP’s the after tax revenue stream is $72 a month higher, this gives lenders $72 a month more revenue over 10 years to reinvest due to the fact SIMP borrowers monthly payments are composed of $100% principal oppose to 90% interest, in the case of the 30-year model.
How do we quantify how much more yield SIMP would receive due to having $72 more dollars each month to reinvest over 10 years? Well one way would be to SIMPly add this amount to our present revenue stream. Please refer to cell J3 SIMP’s effective 10 year yield average would be 6.93%. SIMP produces .93 basis points higher yield at half the risk of a 30 year mortgage. Given SIMP plenty of cushion against yield spread volatility.
So how does SIMP benefit the borrower? Please view cell K8. In 10 years SIMP delivers $25,414 more equity, twice the amount of equity it would have received under the 30- year model and cut the term of the loan from 30 to 20