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USDA Direct Loan Subsidy Recapture

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USDA Direct Loan Subsidy Recapture

What is the approx. amount that must be repaid if the USDA subsidized your mortgages payments.  Example would be $100k house with payments subsidized to 1% over 33 years.Are we talking about hundreds of dollars, thousands of dollars, or tens of thousands of dollars.  I just want to have an understanding about the approx amount we will have to pay back to the USDA if we refinance, sell, or pay the loan off.   Thanks for the help!

Message 1 of 6
5 REPLIES 5
New Member

Re: USDA Direct Loan Subsidy Recapture

Is my calculation way off track? I used Zillow Mort Calc to get these numbers.

 

100K house 

4% Interest rate

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?

Does this mean that after the first year alone we would already have to pay the USDA almost $3k just in the recapture fee?

 

Any and all help is appreciated in advance. Thank you

Message 2 of 6
New Member

Re: USDA Direct Loan Subsidy Recapture

Calculate your payment at 4%:

Mortgage: $100,000

Term: 33 years

Interest Rate: 4%

Payment: $455.20

 

And then calculate your payment at 1%:

Mortgage: $100,000

Term: 33 years

Interest Rate: 1%

Payment: $296.58

 

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.

 

Message 3 of 6
New Visitor

Re: USDA Direct Loan Subsidy Recapture

might be a silly questions but how did you determine the balance of $81873 in your example.

Message 4 of 6
Regular Contributor

Re: USDA Direct Loan Subsidy Recapture

I calculated it myself, but you can do the same thing with any of the online calculators. Here's a link to one of them:

 

http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

 

Enter the relevant info, then click "Show Amortization Table"

 

Edit: That was my post, but for some reason my user name changed.

Message 5 of 6
New Member

Re: USDA Direct Loan Subsidy Recapture

hi, 

 

i would apprecate any info on subsidy recapture topic considering the value of the property is less now than the loan amount. I bought it for 124,900 in 2009 for 38 yrs, now the balance is around 118 K but the value now is probably 89,000. I was getting subsidy only for 3 yrs, since last year- no longer qualified.  What's the best way to handle it, does it make sence to refinance it?(obviously sale is not an option right now) i was reading that usda will offer 15 yrs loan starting september 2014, i woudn't want to refinace for 30 yrs.  Don't have the exact numbers with me but think the amount of subsidy is around 8,000.-9,000. for the 3 yr s period.

 

thank you

Message 6 of 6
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