Newbie question....

[Jeff Sitti]

So I was checking out Rosie's investment club site, as I was browsing there was the following statement made, and I was wondering if someone could dummy it up for me and explain the terms:

We are paying 10-12% TD position. Plus points and possible equity share.

Just trying to understand and learn...thank you in advance...

[J Scott]

TD stands for "Trust Deed" or "Deed of Trust," which is basically the mortgage on a piece of property (mortgage is an old term; TD is the modern-day equivalent).

First TD (which is what is implied here) means that if the borrower defaults, they are first in line for the collateral (i.e., they get the house before anyone else who might have lent money).

10-12% is likely the interest rate they are paying to borrow the money.

Points is a percentage of the amount borrowed paid up front by the borrower.

Possible equity share means that the lender may get a portion of the profits, in addition to the interest on the loan and the points paid upfront.

So, basically what this is saying (assuming the person speaking is the borrower) is:

"We borrowed money at a 10-12% interest rate and the lender is first in line to get the house if we default. In addition to paying 10-12% interest, we also pay a percentage of the loan upfront as a fee and we may have to split the profits with the lender."