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42 Mortgages and Amortization

BEAR-CH1.DOC BA Real Estate Guidebook Jackie Quiram Revised: 09/28/99 1:16 PM Printed: 09/28/99 1:16 PM

Page 42 of 36

Press

until the BGN indicator disappears.

Steps

Keystrokes

Display

Clear TVM values.

0.00

Set P/Y and C/Y to 12.

P/Y =

12.00

C/Y =

12.00
12.00

Enter the loan values.

115

TRM=

30.00

I% =

8.00

LN = 115,000.00

Show bi-weekly
payment amount,
number of payments,
years to pay off the
loan, and interest
saved.

PMT=

421.91

590.84

YRS=

22.66

SAV=

54,498.00

Exit.

54,498.00

Calculating a Mortgage with Bi-Weekly Payments

You are borrowing $115,000 at 8% for 30 years. What will
be the effects and savings if you pay off the loan with
bi-weekly payments, instead of monthly payments?

Solution

Summary of Contents for BA Real Estate

Page 1: ...BA Real Estate Financial Calculator Guidebook 10 7 5...

Page 2: ...D APPREC TAX INS NOM EFF PDS YR INS TAX DEBT INC ROUND FIX BGN END 7 8 9 4 5 6 1 2 3 0 000 x x2 84 88 85 46 29 84 16 17 17 16 16 16 16 16 16 69 69 69 69 89 53 90 89 72 72 72 89 40 32 74 89 18 92 89 18...

Page 3: ...ntributions by Dave Caldwell Charlotte Clark Bob Fedorisko Mike Keller Jackie Quiram Tammy Richards Gary Rouse This digital apparatus does not exceed the Class B limits for radio noise emissions from...

Page 4: ...otal Payment PITI 30 Adjustable Rate Mortgage ARM 32 Finding Periodic Payments for an ARM 33 Comparing an ARM to a Fixed Rate Mortgage 36 Bi Weekly Mortgage Payments 40 Calculating a Mortgage with Bi...

Page 5: ...g the APR of a Refinanced Loan 76 Pricing a Note to Meet a Required Yield 78 Calculating the Yield of a Discounted Mortgage 80 Finding the Net Selling Price after Commission 82 Effects of Turning the...

Page 6: ...have an equal number of payment periods and compounding periods per year Other Time Value of Money TVM situations however may have differing periods For example a savings account may receive regular m...

Page 7: ...Enter the 130 000 loan amount Press 130 q 2 LN 130 000 00 5 Compute the payment amount Press 3 PMT 953 89 Note PMT is displayed as a negative number because it is a cash outflow an amount you pay Find...

Page 8: ...r the selling price Press 153 q PRC 153 000 00 4 Compute PITI Press PITI 1 208 89 Note The P I payment was calculated on the previous page The property tax rate Z and the insurance rate Q will remain...

Page 9: ...loan balance after P2 is displayed P2 12 00 BAL 128 914 07 4 Advance to the amount of principal paid in the first 12 payments Press j PRN 1 085 93 5 Advance to the amount of interest paid in the firs...

Page 10: ...P2 and compute balance principal and interest Press 12 O 3 5 j to calculate and enter P2 and start the list of results The loan balance after P2 is displayed P2 42 00 BAL 125 788 43 4 Show the amount...

Page 11: ...rate Press 3 PMT 1 046 01 3 Change the interest rate to 9 5 Press 9 5 1 I 9 50 4 Change the term to 15 years Press 15 0 TRM 15 00 5 Compute the new payment amount 15 year loan Press 3 PMT 1 357 49 Cha...

Page 12: ...0 q 7 V1 150 000 00 2 Enter the expected annual appreciation rate Press 3 APP 3 00 3 Enter the number of periods years Press 5 9 PD 5 00 4 Calculate the expected value at the end of five years Press 8...

Page 13: ...nsurance rate Press 5 Q IS 0 50 6 Enter the term of the loan Press 30 0 TRM 30 00 7 Enter the interest rate Press 7 5 1 I 7 50 8 Start the qualification Press INC 9 Enter monthly income amount Press 6...

Page 14: ...00 12 Compute loan payment Press j PMT 1 272 77 13 Compute loan amount Press j QLA 182 028 97 14 Compute sales price Press j QPR 227 536 21 15 Compute down payment amount Press j DN 45 507 24 The buy...

Page 15: ...r defaults The model remains active until you store a value in another model or perform a TVM calculation While a model is active you can store its values to memory or to the TVM values Attempting to...

Page 16: ...ulating a Balloon Payment 26 Finding the Payment for a Mortgage with a Balloon 28 Total Payment Including Taxes and Insurance PITI 29 Computing Total Payment PITI 30 Adjustable Rate Mortgage ARM 32 Fi...

Page 17: ...ber of payments N required to repay the loan amount 1 Enters or computes the annual interest rate I 2 Enters or computes the loan amount 3 Enters or computes the payment amount PMT 4 Enters or compute...

Page 18: ...ngs For example a savings program may have regular monthly deposits P Y 12 but daily compounding C Y 365 When you press the display shows P Y nn where nn is the current setting You can press j to acce...

Page 19: ...otal PITI payments Later when you know the tax and insurance amounts for a specific property you can override these settings 1 Press to turn the calculator on 2 Enter the property tax rate as an annua...

Page 20: ...not known If you have the loan amount and percentage you can calculate the sales price and down payment amount Assume that a client borrowed 125 000 on an 85 loan some years ago What was the original...

Page 21: ...Enter price less down payment 130 q X 10 A j 2 LN 117 000 00 Compute monthly payment 3 PMT 951 95 Find the monthly payment if the term of the loan is 15 years instead of 30 Steps Keystrokes Display Ch...

Page 22: ...9 28 99 1 16 PM Page 21 of 36 Mortgage Payment Principal and Interest 1 Clear TVM values if not already cleared 2 Enter sales price 130 000 3 Subtract down payment X 10 A 4 Calculate and enter loan am...

Page 23: ...0 8 5 1 250 q 2 3 TRM 25 00 I 8 50 LN 250 000 00 PMT 2 013 07 Enter the number of payments made in 15 years 15 O 12 j 180 00 N 180 00 Calculate unpaid balance 4 FV 162 362 91 Note You also can use the...

Page 24: ...16 PM Page 23 of 36 Calculating Unpaid Balance on an Existing Mortgage 1 Clear TVM values if not already cleared 2 Enter original term of loan in years 25 0 3 Enter interest rate 8 5 1 4 Enter origina...

Page 25: ...0 TRM 30 00 Enter interest rate 7 75 1 I 7 75 Enter loan amount 125 q 2 LN 125 000 00 Compute payment 3 PMT 895 52 Add extra payment amount as a negative value a 100 t 100 Calculate and enter new paym...

Page 26: ...g Off a Loan Early by Making Larger Payments 1 Clear TVM values if not already cleared 2 Enter term of loan in years 30 0 3 Enter interest rate 7 75 1 4 Enter loan amount 125 000 2 5 Compute monthly p...

Page 27: ...d total balloon payment a 3 j 54 509 23 Note The balloon payment includes both the unpaid balance and the final monthly payment You could of course estimate the balloon payment simply by calculating t...

Page 28: ...Retire a Mortgage 1 Clear TVM values if not already cleared 2 Enter term of loan in years 30 0 3 Enter interest rate 9 25 1 4 Enter loan amount 67 500 2 5 Compute payment amount and round the result...

Page 29: ...negative 20 q t 4 FV 20 000 00 Compute payment 3 PMT 500 22 Calculating Monthly Payment for a Mortgage with a Balloon Payment 1 Clear TVM values if not already cleared 2 Enter term of loan in years 3...

Page 30: ...property 4 Use the TVM keys to enter TERM I and LOAN Note If the borrower s mortgage requires private mortgage insurance that rate for example 1 4 to 3 8 should be added to the annual interest rate 5...

Page 31: ...cal tax rate 2 38 Z TX 2 38 Enter insurance rate 78 Q IS 0 78 Enter price of property 85 q PRC 85 000 00 Enter term in years 30 0 TRM 30 00 Enter interest rate 9 1 I 9 00 Enter price less down payment...

Page 32: ...ce Based on Tax and Insurance Percents 1 Clear TVM values if not already cleared 2 Enter local property tax rate if not already entered 2 38 Z 3 Enter local insurance rate if not already entered 0 78...

Page 33: ...ARM model Press j repeatedly to display the results and to repeat the sequence for the next range At each repetition the calculator updates P1 and P2 automatically If the span between P1 and P2 is di...

Page 34: ...j j PMT 599 55 BAL 98 772 00 Accept range for second year and show previous I j j j P1 13 00 P2 24 00 I 6 00 Increase I by 2 show PMT and BAL for second year 8 j j I 8 00 PMT 730 86 BAL 97 870 87 Acc...

Page 35: ...show previous I j j P1 37 00 P2 48 00 I 10 00 Increase I to the cap for the loan and show PMT and BAL for fourth year 12 j j I 12 00 PMT 1 012 28 BAL 96 688 17 Exit ARM 96 688 17 The payment for the...

Page 36: ...adjustment period j 98 772 00 12 Return to P1 and accept updated P1 as beginning payment of second adjustment period j 13 00 j 13 Accept the updated P2 or enter the number of the ending payment of the...

Page 37: ...ment Period Rate Payment Initial 5 00 778 39 Second 7 00 960 21 Third 9 00 1 153 34 Fourth maximum 11 00 1 354 86 Steps Keystrokes Display Clear TVM values 0 00 Enter term 30 0 TRM 30 00 Enter fixed r...

Page 38: ...g amount of third period ARM payment from fixed rate payment 3 t X 1153 34 j 139 48 Multiply monthly savings costs by number of months in this ARM period O 12 j 1 673 75 Add to stored savings and stor...

Page 39: ...Enter amount of fixed rate payment 1 013 86 t 4 Subtract amount of initial ARM payment X 778 39 5 View monthly savings with ARM payment j 235 47 6 Multiply monthly savings costs by the number of month...

Page 40: ...013 86 t 21 Subtract amount of ARM payment for fourth period X 1 354 86 22 View monthly savings costs during fourth period j 341 00 23 Multiply monthly savings costs by number of months in this adjust...

Page 41: ...otal number of bi weekly payments required YRS The number of years required to retire the loan SAV The interest saved rounded to the nearest dollar in comparison with monthly payments Press j repeated...

Page 42: ...f interest paid This is because the payments are more frequent and you are making 13 full monthly payments annually instead of 12 For example consider a 115 000 loan at 8 for 30 years The monthly mort...

Page 43: ...12 00 C Y 12 00 12 00 Enter the loan values 30 0 8 1 115 q 2 TRM 30 00 I 8 00 LN 115 000 00 Show bi weekly payment amount number of payments years to pay off the loan and interest saved L j j j PMT 42...

Page 44: ...cleared 2 Enter term of loan in years 30 0 3 Enter interest rate 8 1 4 Enter loan amount 115 000 2 5 Start Bi Weekly and view the bi weekly payment amount L 421 91 6 View the number of bi weekly paym...

Page 45: ...q j 2 LN 168 000 00 Compute payment 3 PMT 1 245 83 Enter number of payments during period and store as N 5 O 12 j N 60 00 Compute balance after five years 4 FV 159 879 69 Note If you do not normally...

Page 46: ...an Mortgage 1 Clear TVM values if not already cleared 2 Enter number of payment periods per year 12 j 3 Set compounding periods to semi annual 2 j 4 Enter term of loan in years 30 0 5 Enter interest r...

Page 47: ...the last displayed value in the display with no label Initially the display shows P1 1 You can press j to accept the P1 value or you can enter or calculate a new value and press j The display tempora...

Page 48: ...125 1 105 q 2 TRM 30 00 I 9 13 LN 105 000 00 Calculate payment 3 PMT 854 31 Start amortization P1 1 00 Set P2 for 1st year j 8 P2 8 Display balance principal and interest for the first tax year j j j...

Page 49: ...00 and P2 to 16 00 assuming that the next range is also 8 months Changing P2 to 20 establishes a 12 month range so the calculator can correctly update both P1 and P2 for successive years The third tax...

Page 50: ...ining after P2 104 540 93 10 View principal paid from P1 through P2 j 459 07 11 View interest paid from P1 through P2 j 6 375 41 12 Return to P1 and accept updated P1 as next beginning payment period...

Page 51: ...50 Mortgages and Amortization BEAR CH1 DOC BA Real Estate Guidebook Jackie Quiram Revised 09 28 99 1 16 PM Printed 09 28 99 1 16 PM Page 50 of 36...

Page 52: ...equired 53 Finding the Qualifying Loan Amount 54 Finding the Minimum Income Required 56 Finding the Maximum Allowable Debt 58 Finding the Net Cost of Housing 60 Chapter 2 Buyer Qualification This chap...

Page 53: ...percent and then press j PITI The total monthly payment including principal interest tax and insurance PMT The monthly loan payment for which the buyer should qualify QLA The loan amount for which th...

Page 54: ...e Meaning PRC Enter the sales price of the property and press j DN Enter the down payment amount or enter a two digit number for the down payment percent and then press j DBT Enter monthly debt and pr...

Page 55: ...00 Enter debt percent 36 d DB 36 00 Enter tax percent 1 5 Z TX 1 50 Enter insurance percent 5 Q IS 0 50 Enter term 30 0 TRM 30 00 Enter interest rate 8 1 I 8 00 Start qualification INC 0 00 Enter mon...

Page 56: ...entered 1 5 Z 5 Enter insurance percent if not already entered 5 Q 6 Enter term of loan in years 30 0 7 Enter interest rate 8 1 8 Start the qualification 9 Enter gross monthly income amount total 6 50...

Page 57: ...t and compute qualifying loan amount 635 j DBT 635 00 LN 200 000 00 Compute payment j PMT 1 467 53 Compute PITI j PITI 1 884 20 Compute qualifying income j QI 6 997 78 The calculator uses the TAX INS...

Page 58: ...d 36 d 4 Enter annual tax amount 3 750 5 Add annual insurance amount and enter total a 1 250 j E 6 Enter term of loan in years 30 0 7 Enter interest rate 8 1 8 Start the qualification 9 Enter price 25...

Page 59: ...DBT 0 00 Enter a zero for monthly debt amount and compute qualifying loan amount 0 j DBT 0 00 LN 112 500 00 Compute payment j PMT 825 49 Compute PITI and store the result j T g PITI 1 033 82 Compute...

Page 60: ...ed 5 Q 5 Enter term of loan in years 30 0 6 Enter interest rate 8 1 7 Start the qualification 8 Enter price 125 000 j 9 Enter down payment percent 0 to 99 10 j 10 Enter a zero for monthly debt amount...

Page 61: ...amount O 1 A j T g MEM 6 720 00 Add annual tax amount O Z A a g j 8 295 00 Multiply by income tax rate O 28 A 0 28 Calculate annual savings j 2 322 60 Divide by 12 to find monthly savings and store t...

Page 62: ...ount 2 84 000 00 10 Multiply by annual interest rate as a percentage to find approximate annual interest O 1 A j 6 720 00 T g 11 Add annual tax amount O Z A j 1 575 00 12 Calculate total tax deductibl...

Page 63: ...62 Buyer Qualification...

Page 64: ...alculating Percent Change and Appreciation 70 Interest Conversion Model 72 Annual Percentage Rate APR 74 Finding the APR of a Refinanced Loan 76 Pricing a Note to Meet a Required Yield 78 Calculating...

Page 65: ...te of account 7 1 I 7 00 Enter initial deposit 50 q t 2 LN 50 000 00 Compute the future value 4 FV 201 936 94 You are loaning the bank 50 000 Since you are paying the money out you must make the numbe...

Page 66: ...21 PM Page 65 of 20 Savings Account with One Deposit 1 Clear TVM values if not already cleared 2 Enter number of compounding periods per year 12 j j 3 Enter term of account in years 20 0 4 Enter inter...

Page 67: ...iods per year j BGN 12 00 Calculate future value of the account 20 0 7 5 1 200 t 3 4 BGN TRM 20 00 BGN I 7 50 BGN PMT 200 00 BGN FV 111 438 31 Note The quarterly compounding example is shown on page 6...

Page 68: ...beginning or end of period payments as necessary 3 Enter number of deposit periods per year 12 j 4 Enter number of compounding periods per year 12 j 5 Enter term of account 20 0 6 Enter interest rate...

Page 69: ...s Display Set 12 payments per year 12 j BGN P Y 12 00 BGN C Y 12 00 Set 4 compounding periods per year 4 j BGN 4 00 Calculate future value of the account 4 BGN FV 110 801 04 Clear display and restore...

Page 70: ...te of appre ciation per period when PD 1 Note PD is automatically set to a value of 1 when you first activate this model To calculate the total rate of change or appreciation PD must be set to 1 When...

Page 71: ...ng value would be required for a 10 change Steps Keystrokes Display Enter change 10 APP 10 00 Compute ending value 8 V2 137 50 If a 70 000 home appreciates at 2 per year what will it be worth in 10 ye...

Page 72: ...ate 1 Enter starting value or price 125 7 2 Enter ending value or price 135 8 3 Enter number of periods as 1 1 9 4 Compute appreciation rate 8 00 Estimate of Appreciated Value 1 Enter starting value o...

Page 73: ...n annual effective rate of 16 Steps Keystrokes Display Enter desired effective rate 16 G EFF 16 00 Enter periods per year 4 H PDS 4 00 Compute nominal rate F NOM 15 12 Convert a 15 nominal interest ra...

Page 74: ...99 1 21 PM Page 73 of 20 Interest Conversion From Effective to Nominal 1 Enter effective rate 16 G 2 Enter number of compounding periods per year 4 H 3 Compute nominal rate F 15 12 From Nominal to Eff...

Page 75: ...te Although the calculator proposes the same interest rate that is stored in the TVM I value entering I in this model does not change the TVM I Assuming a 125 000 loan 8 fixed term interest 30 year te...

Page 76: ...1 21 PM Page 75 of 20 Annual Percentage Rate Considering Points and Fees 1 Clear TVM values if not already cleared 2 Enter term of loan in years 30 0 3 Enter loan amount 125 000 2 4 Start APR N 5 Ent...

Page 77: ...5 0 4 TRM 5 00 FV 101 569 75 Replace original loan with FV and clear FV t 2 r 4 LN 101 569 75 FV 0 00 Enter original term and new rate 30 0 8 5 1 TRM 30 00 I 8 50 Compute new payment 3 PMT 780 98 Sta...

Page 78: ...er interest rate 12 1 4 Enter face value of mortgage loan 104 000 2 5 Compute payment amount 3 1 069 76 6 Enter number of payment years 5 0 7 Compute balance of original loan and store as amount of re...

Page 79: ...I 8 00 Enter amount of original note 25 q 2 LN 25 000 00 Compute payment 3 PMT 303 32 Recall number of payments in original note and store T g MEM 120 00 Enter number of payments already made 36 N 36...

Page 80: ...4 Enter amount of original note 25 000 2 5 Compute original payment 3 303 32 6 Recall total number of payments in original note and store in memory 120 00 T g 7 Enter number of payments already made...

Page 81: ...f mortgage 200 q 2 LN 200 000 00 Compute payment 3 PMT 1 467 53 Enter discounted purchase price 180 q 2 LN 180 000 00 Enter number of payments paid and store in memory 3 O 12 j T g MEM 36 00 Enter num...

Page 82: ...ready cleared 2 Enter original term of loan in years 30 0 3 Enter interest rate 8 1 4 Enter face value of mortgage loan 200 000 2 5 Compute payment amount 3 1 467 53 6 Enter discounted purchase price...

Page 83: ...one minus the sales commission g X 6 A j T g MEM 0 94 Compute the required selling price 125 q B g j 132 978 72 Compute the sales commission O 6 A j 7 978 72 Finding the Net Selling Price after Commis...

Page 84: ...ting the Fixed Decimal Format 86 Entering Numbers and Clearing the Calculator 87 Calculations 88 Basic Arithmetic 89 Percent Calculations 90 Rounding Results 91 Using Memory 92 Battery Information 93...

Page 85: ...ff turns it on and shows the last displayed information When the calculator is on you can use to clear the display an incomplete calculation or the error message These are described on page 87 Turns t...

Page 86: ...n until you remove the fixed decimal setting CPT You have pressed the key The calculator will compute a value for the next financial key you press M The user memory contains a value other than zero BG...

Page 87: ...mal places trailing zeros are added to the displayed result o s Removes the fixed decimal setting and turns the FIX indicator off Note Turning the calculator off does not change the fixed decimal sett...

Page 88: ...the calculation Pressing twice clears the display and any incomplete calculation Pressing does not clear the user memory TVM values or any settings If you press while viewing a list of results or a p...

Page 89: ...ation However results are calculated and stored internally to 13 digits A result whose exponent is greater than 99 is treated as an overflow and an error message is displayed A result whose exponent i...

Page 90: ...e or negative of the displayed number The number can be either a result or a number you are entering Example 8 t a 12 j 4 00 K Squares the number in the display Example 6 K a 4 K j 52 00 Calculates th...

Page 91: ...mber of which n or the displayed result after B is pressed is p Example 250 B 5 A 0 05 j 5 000 00 Add On n a p A j Finds p of the displayed number n or the displayed result after a is pressed and adds...

Page 92: ...However n rounds the internal 13 digit form of a displayed result to match the displayed form Keystrokes Display Internal Form o s 0 0 000000000000 2 1 414213562 1 414213562373 o 2 1 41 1 414213562373...

Page 93: ...and also can be used with the TVM keys such as 3 and keys of other financial models if active For example 3 recalls the current value of PMT Pressing the T key is not necessary when storing to financ...

Page 94: ...t battery types 1 Remove slide cover Place calculator face down 2 Using a small Phillips screwdriver remove screws from back case 3 Pull off back case 4 Remove discharged batteries Caution Avoid conta...

Page 95: ...stomers outside the U S Canada Puerto Rico and the Virgin Islands Contact TI by e mail or visit the TI calculator home page on the World Wide Web e mail ti cares ti com Internet www ti com calc Produc...

Page 96: ...tes provinces do not allow the exclusion or limitation of implied warranties or consequential damages so the above limitations or exclusions may not apply to you Legal Remedies This warranty gives you...

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