Owner needs to sell after 3 years for personal reasons
Sales Price
15-year
Amortization
$750,000
Commission
($75,000)
5%
Decline
10-year
Amortization
$712,500
$750,000
($71,250)
($75,000)
5%
Decline
For a 15-year loan in this situation, a dentist who had to sell
the practice in three years
would need to bring significant
cash to closing in order to pay
off debt – up to $43,000 if they
had a 5% decline in collections.
However with a 10-year loan,
the dentist would make somewhere between $38,000 and
$67,000.
$712,500
($71,250)
Taxes
($45,000)
($40,000)
($45,000)
($40,000)
Loan Balance
$645,000
$645,000
$563,000
$563,000
($15,000)
($43,000)
$67,000
$38,250
Sales Proceeds
$630,000
Net Proceeds
to borrower
$601,250
$630,000
$601,250
Owner needs to sell after 5 years for personal reasons
Sales Price
Commission
15-year
Amortization
$750,000
($75,000)
5%
Decline
$712,500
($71,250)
10-year
Amortization
$750,000
($75,000)
5%
Decline
Here, the dentist with a 15-year
loan would make some money,
but significantly less than with
a 10-year loan.
$712,500
($71,250)
Taxes
($85,000)
($75,000)
($85,000)
($75,000)
Loan Balance
$566,000
$566,000
$422,000
$422,000
$24,000
$250
$168,000
$144,250
Sal