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1. X acquires a home for a mortgage of $ 90,400. The home is appraised at $ 120,000. Giving X $ 29,600 in equity.

2. X lives with Y since the acquision and each pays half the amount of monthly mtg payment.

3. 2 years later, the mtg bal is $ 86,874. Home is appraised at $ 185,000. Equity in is now $ 98,126.

4. X and Y refi together. Y has a $ 49,700 debt that got refi’d into the mtg. Mtg bal is $ 148,000-equity, $ 37,000.

5. Shortly after, an equity loan is taken out for $ 27,730 that benefits X.

6. 1 year after the 1st refi, a 2nd refi is accomplished to consolidate. The mortgage before the consolidation was down to $ 145,888 and the appraisal is at $ 270,000.

7. The new mortgage is $ 182,000 with an appraisal of $ 270,000. Equity is at $ 88,000.

8. 2 years later, X & Y want to disolve the agreement.

If they sell, how much equity (%) should each recieve assuming home is sold at $ 270,000.

If one buys the other out, how much would X pay Y? Y pay X?

2 Thoughts on A realy really tough one!?
  1. Reply
    tenacious 1
    May 16, 2011 at 10:42 pm

    since y benefited to the tune of 49700 originally and then x benefited only 27730 it seems to me that y still owes x approximately 22000-30 of unrealized appreciation to the benefit of x before they split the balance of the appreciation equally. If equity is 88000 x should pay y 88000-21970 divided by 2 or 33915.Y should pay X 33915 +21970 for a total of 55885.

  2. Reply
    Myron
    May 16, 2011 at 10:48 pm

    So this is how divorce attorneys figure out their cases, j/k If I tell you you cannot load this into your palm pilot for your exam ok ?
    1- 90,400 is value
    2- Keeps everything even
    3- mortgage is lowered by 3,526 each own 1,763 buydown
    4 – Loan raised to 148K Y receives 49,700
    5 – cost basis raised to 175,730 X receives 27,730
    6- – mortgage is bought down to 145,888 each own 14,921 buydown
    7- Loan raised back to 182K each receive 18,056
    8 – Since no figures given will assume was interest only loan

    The equity difference is meaningless as there is no return on equity until it is converted into cash.

    270K Sale Price
    182K Less Loan Bal
    88K End Equity

    90,400 start
    270 finish
    179,600 total performance / 2
    89,800 minus X previous draws of 27,730 = 62,070 to X

    89,800 minus Y Previous draws of 49,700 = 40,100 to Y

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