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# Re: USDA Direct Loan Subsidy Recapture

396 month loan

Interest would be around \$3,973 annully

Using the same inputs except changing the interest rate to 1%

Interest would be around \$988 annully

The different between the two would be \$2,985.

Does this mean the USDA subsidized \$2,985 each year?

# Re: USDA Direct Loan Subsidy Recapture

Subtract the two: \$455.20 - \$296.58 = \$158.62 monthly subsidy

Annual subsidy: \$158.62 x 12 = \$1,903.44

Your repayment of the subsidy is capped at 50% of your equity in the house. So for example, if you decide to sell 10 years from now, in August 2024 your outstanding principal would be \$81,873. Assume your house is worth \$110,000 in 2024. The subidy repayment would be calculated as follows.

Total Subsidy: \$158.62 x 120 months = \$19,034.40

Total Equity: \$110,000 - \$81,873 = \$28,127

50% Equity: \$28,127 x 50% = \$14,064

50% of your equity is less than the total subsidy, so you would have to pay back \$14,064 at the time of sale, not the entire subsidy balance of \$19,034.

After 5 years, the numbers would be as follows (August 2019). Assume \$105,000 sale price; \$91,772 balance.

Total Subsidy: \$158.62 x 60 months = \$9,517.20

Total Equity: \$105,000 - \$91,772 = \$13,228

50% Equity: \$13,228 x 50% = \$6,614

50% of your equity is still less than the total subsidy, so you would have to pay back \$6,614 after five years, not the entire subsidy balance of \$9,517.

Source: ficoforums.myfico.com
Category: Credit