Lesson 17 of 25 · 7 min

A second threshold inside the lender's threshold, as arithmetic

Dividing the same balance by one-half instead of seven-tenths is a second trigger, not a recommendation.

The lender's threshold on this sample is 70 percent of market value. A second threshold is any other percentage you divide the same balance by. It is a second number, not a second instruction. Take 50 percent as the illustration. The self-trigger is $1,858,563.47 ÷ 0.50 = $3,717,126.94. Against a book of $6,032,795 that is a decline of ($6,032,795 − $3,717,126.94) ÷ $6,032,795 = $2,315,668.06 ÷ $6,032,795 = 38.38 percent.

The lender's blended decline remains 55.99 percent. The gap between 38.38 percent and 55.99 percent is 17.61 percentage points. In dollars the two triggers sit $3,717,126.94 − $2,655,090.67 = $1,062,036.27 apart. Both quotients use the same closing balance. They differ only in the divisor. Nothing in the construction chooses 50 percent over 45 or 55; those would be $1,858,563.47 ÷ 0.45 = $4,130,141.04 and $1,858,563.47 ÷ 0.55 = $3,379,206.31, two more numbers on the same shelf.

The mechanism is a second remainder computed inside the lender's remainder. It does not move the clause. It does not rewrite the sample. It is the same division Track 1 used for a trigger, performed at a different threshold so that two distances exist on one statement. Naming it a buffer is naming the arithmetic, not naming an action.

A second threshold is a second divisor. The loan still has one clause. The page now has two quotients.

Key terms

Self-trigger: The balance divided by a percentage other than the lender's threshold. On a 50 percent illustration, $1,858,563.47 ÷ 0.50 = $3,717,126.94.
Inner remainder: The decline from the current book to the self-trigger. Here 38.38 percent, against a lender decline of 55.99 percent.

Worked example

50 percent against 70 percent on the March close

Balance $1,858,563.47, book $6,032,795. Lender threshold 70 percent. Illustration threshold 50 percent. Not a recommendation of either figure.

Lender trigger: $2,655,090.67
Self-trigger at 50 percent: $3,717,126.94
Dollar gap between the two triggers: $1,062,036.27
Decline to the self-trigger: 38.38%
Decline to the lender trigger: 55.99%
Gap between the two declines: 17.61 percentage points

One balance, two divisors, two remainders. The second remainder is a computed number sitting inside the first.

Check yourself

Using the March close of $1,858,563.47 and a 50 percent illustration threshold, what decline from $6,032,795 meets that second trigger?

Saved in this browser only. No account, nothing sent anywhere.

Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.