# 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

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