#borrowing
Smart borrowing strategies and debt management
APR prices borrowing without compounding; APY pays savings with it — compare APR to APR, APY to APY, and run the conversion before close calls.
A balloon loan amortizes over 30 years but matures in 5 to 7, leaving most principal due at once — refinance early or fund the lump sum deliberately.
Lump sum at a fixed rate versus draws as needed at a variable rate — and the IRS allows the interest deduction only when the money improves your home.
PITI — principal, interest, taxes, insurance — is your real monthly mortgage payment, and the 28/36 rule caps housing at 28% of gross income.
RESPA locks lender fees to the Loan Estimate quote, bans referral kickbacks, and caps escrow cushions at two months — know the buckets before you sign.
APR spreads borrowing costs over a year without compounding; APY folds compounding into savings growth — compare APR to APR and APY to APY.
Under U.S. GAAP, a same-lender refinance is an extinguishment when cash flows differ by 10% or more — otherwise it is a modification with a new rate.
Divide total liabilities by total assets: under 0.5 is healthy, over 0.7 is fragile, and lenders recompute it after adding your loan.
The Fed raised rates to 3.75–4% on Sept 16, 2026 and prime hit 7.00% the next day: every prime-plus business line, SBA 7(a) loan and card reprices now.
FHA, VA and USDA mortgages can be assumed at the seller's 3% rate while new loans cost 6.76%; the catch is the equity gap due at closing.
SBA SOP 50 10 8, effective June 1, 2025, dropped the 7(a) collateral trigger from $500,000 to $50,000, requires liens on personal real estate with 25%+ equity for 20%+ owners, and tightened equity injection rules — HELOCs need outside income, seller notes must sit on full standby, and phased ownership buyouts are gone.
A below-market loan triggers Section 7872, which treats forgone interest as taxable income to the lender even when no cash changes hands. This guide covers the $10,000 and $100,000 de minimis exceptions, the gift tax connection, and how charging the AFR avoids the whole problem.
