MORTGAGE QUALIFIER PLUS ® Residential Mortgage Finance Calculator Model 3416 USER’S GUIDE
Introducing the MORTGAGE QUALIFIER PLUS® Mortgage Loan Calculator The MORTGAGE QUALIFIER PLUS was custom-designed for mortgage lenders and residential real estate professionals.
TABLE OF CONTENTS GETTING STARTED..........................................................................1 KEY DEFINITIONS .........................................................................1 Basic Operation Keys ..................................................................1 Mortgage Loan (TVM) Keys.........................................................2 Tax, Insurance and Expense Keys ..............................................6 Tax Savings Function........................................
Finding Loan Amount Based on Sales Price and Down Payment..................................................................................28 Taxes and Insurance..................................................................29 Setting Tax and Insurance % Rates...........................................30 Recalling Tax and Insurance % Rates .......................................30 Setting Tax and Insurance $ ......................................................30 Calculating Tax and Insurance % or $ ...
Finding Qualifying Loan Amount and Sales Price (Simple Example Excluding Tax/Insurance).........................................54 Qualifying Loan Amount and Sales Price (Complete Example Including Down Payment, Tax/Insurance, Monthly Association Dues) ......................................................................................55 “Restricted” Qualifying ...............................................................56 “Unrestricted” Qualifying ......................................................
GETTING STARTED KEY DEFINITIONS Basic Operation Keys O Turns all power off. The memory and most financial registers are cleared. o If off, turns power on. If on, a single press clears the last entry while a second press in succession clears all non-permanent registers.* *Clears Loan Amount, Payment, Price, Down Payment, Income, Debt, Expense, and Mortgage Insurance/MI (unless MI is set to hold; see Preference Settings). +–x ÷= Arithmetic operation keys. 0-9 Digits used for keying in numbers.
s– Change Sign (+/–) — Changes the sign of the displayed value from positive to negative or vice versa. sx Clear All — Clears all entered values and returns any stored values to their default settings. Use this only with caution, as it will reset ratios, Periods per Year, etc. back to their defaults (see the Appendix for a list of these settings).
ˆ Interest — Enters or solves for the annual interest rate. Second press gives the periodic rate. Note: Stored permanently, until you change it or perform a Clear All (s x). sl Future Value (FV) — Enters or solves for the future value of a financial problem. P Sales Price — Enters or calculates Sales Price based on the entries of Loan Amount (or equivalent mortgage components) and Down Payment.
s÷ Payments per Year (Pmt/Yr) — Used to set the number of payment periods per year. Default value is 12, for monthly. Note: You can store the number of payments/year permanently or semi-permanently. See Preference Settings). a Amortization (Amort) — Finds total interest, principal, remaining balance, remaining term and estimated mortgage interest tax deduction.
A Adjustable Rate Mortgage — Calculates the payment and re-amortizes a fully or partially amortized Adjustable Rate Mortgage based on the inputs of both an Interest Adjustment and a Term Adjustment, which are entered using the Colon : key (Interest Adjustment : Term Adjustment). For example, an ARM which increases 1% every six months is entered 1 : • 5 A; an ARM which decreases 1% every six months is entered 1 : • 5 s A. (ARM rates are stored permanently.
Tax, Insurance and Expense Keys In addition to Qualifying, the following keys are also involved in PITI or total payment calculations (e.g., they are added to the monthly payment): t Property Tax — Used for calculating PITI and Total payment, and Qualifying. Stores estimated annual property tax in either percent or dollar amount. If entered as an annual dollar amount, a press of ® and t converts to the monthly tax amount, and pressing t again converts to the annual percentage rate.
Note: Tax and Insurance entered as dollar amounts will remain fixed, even if sales price or loan amount is changed. However, if entered as a percentage of sales price or loan amount, these items will automatically be re-calculated if sales price or loan amount is changed. e Expense — For Total Payment and Qualifying. Enters monthly housing expense (e.g., homeowner’s association dues, maintenance and utilities).
Qualifying Keys q (Qualify Based on 28%-36%) — A multi-function key which, based on entered variables, performs the following pre-qualifying functions: 1) Stores income and debt ratios for loan qualifying. Ratios are entered using the Colon : key (Income Ratio : Debt Ratio). For example, income and debt ratios of 28% and 36%, respectively, are entered and permanently stored as follows: 2 8 : 3 6 q. Default income and debt ratios for this key are 28% and 36%, respectively.
(Cont’d) 2) Calculates the maximum loan amount for which a buyer may qualify, based on the stored income and debt qualifying ratios and the entered: • Term • Interest • Annual Income • Monthly Debt —and optional— • Annual Property Tax and Insurance • Annual Mortgage Insurance (Private Mortgage Insurance or PMI) • other monthly housing expenses (e.g., homeowner’s association dues) The output of this key is as follows: Press Calculation 1 Displays stored Qualifying Ratios (e.g.
(Cont’d) 3) Calculates the annual income (“Stated Income”) required and allowable monthly debt for a desired loan amount or sales price based on the stored income and debt qualifying ratios and the entered: • • • Term Interest Price (down payment) or Loan Amount 4) Also finds buyer's actual income and debt ratios given both buyer and property data. By default, the first press of q displays the stored qualifying ratios and the second press calculates the buyer's actual ratios.
1st and 2nd Trust Deeds (Combo Loan) Keys The Combo Loan keys show the savings of obtaining a 1st and 2nd trust deed (TD) loan over a single, fixed-rate loan where mortgage insurance, or private mortgage insurance (PMI), is required. This routine requires a fixed-rate loan to be entered using the standard l, p, ˆ and/or T keys so that a loan comparison can be made.
(Cont’d) ** and s * (Int-Only 2nd) Key Output: For a comparison of a fixed-rate combo loan versus a fixed-rate loan with required mortgage insurance, each key press (once all other loan values are entered, including 1st:2nd Interest:Term) will calculate: Press Calculation 1 Combo Loan Combined (Blended) Interest Rate 2 Equivalent Interest Rate of Fixed Rate Mortgage with Mortgage Insurance 3 Combo Loan Combined (1st/2nd TD) Payment 4 Equivalent Payment of Fixed Rate Mortgage with Mortgage Insurance 5 Monthl
BASIC ARITHMETIC EXAMPLES Arithmetic This calculator uses standard chaining logic, which simply means that you enter your first value, the operator (+, –, x, ÷), the second value and then the equals sign (=). A. B. C. D. 3 3 3 3 + – x ÷ 2 2 2 2 = = = = 5.00 1.00 6.00 1.50 Percentage Calculations The Percent % key can be used for finding a given percent of a number or for working add-on, discount, or division percentage calculations. A. B. C. D.
Reduction in Listing Price (Discount %) A nervous seller has had her property on the market for just over four months listed at $175,500. Because she is anxious to move into a new home, she wishes to reduce the listing price by 5%. Calculate both the amount of reduction in dollars and the new, lowered listing price. STEPS KEYSTROKES Clear calculator Enter sales price Subtract 5% Find new listing price oo 175500 –5% = DISPLAY 0.00 175,500. 8,775.00 166,725.
Date Examples Using the : key, you can quickly solve common real estate date problems: escrow or closing dates, listing expiration dates, and the number of days prepaid interest, etc. You enter a date as follows: Numerical Month : Numerical Day : and two-digit Numerical Year.
CALCULATOR SETTINGS Decimal Place Selection With the s key, you have the option of selecting the number of decimal places you’d like to display. The values are rounded using conventional 5/4 rounding. You can do this prior to finding an answer or afterwards. Press s followed by the number of decimal places you wish to display: s s s s s s s s 6 5 4 3 2 1 0 • 0.000000 0.00000 0.0000 0.000 0.00 0.0 0. floating point To return to the standard two-decimal place setting, press s 2.
Preference Settings Your calculator has a Preference Mode, which allows you to program the calculator to various settings. For example, it lets you store certain values permanently, display certain values, or show values in a specific order. To access the Preference Mode, press s, then =, then keep pressing = to toggle through the settings listed below. Press the + key to advance through the sub-settings. Use the – key to back up within the sub-settings.
(Cont’d) After s, Keep Pressing =: Display 4 Mortgage Insurance (MI) - Clr-Clr M Ins — - Clr OFF M Ins — - HOLD Pct. M Ins — - HOLD ALL M Ins — 5 Clears mortgage insurance (% and $) upon o o. (Default) Clears mortgage insurance (% and $) at O. Holds only percent (%) mortgage insurance entry at O. Holds (% or $) mortgage insurance entry at O.
MEMORY Accumulative Memory Whenever the µ key is pressed, the displayed value will be added to cumulative memory. This value will remain in Memory until cleared or when the calculator is turned off.
Memory Storage Keys (M0-M6) In addition to the standard cumulative Memory (as described above), your calculator has six independent Storage Registers — [M0] through [M6] — that can be used to permanently store single, noncumulative values. These values will be held when your calculator is turned off, and will only clear when a “Clear All” is performed (via s x). You can replace a value in one of these Memory registers by storing a new value in place of the stored value.
Additional Memory Storage Keys (M10-M19) In addition to M0-M6 (as described previously), your calculator has ten additional independent Storage Registers — M10 through M19 — that can also be used to permanently store single, non-cumulative values. To access these storage registers, use the following keystrokes: s ® • #, with # being digits 0 - 9. These storage registers operate identically to M0-M6. Examples: Store 250 into M10 and recall the value: KEYSTROKES DISPLAY 250s®•0 Oo ®•0 M-10 250.00 0.
EXAMPLES MORTGAGE LOANS/TIME-VALUE-OF-MONEY (TVM) 1. The basic loan keys — l, p, T and ˆ — work just like you would say them. For example, if you want to borrow $100,000 for 30 years at 10% interest, just enter those three known variables and press the key for the unknown fourth variable: p. 2. When computing future value problems, enter the present value into the l key. 3. Financial values may be entered in any order you want. 4.
Finding the Monthly Mortgage (P&I) Payment Find the monthly P&I (principal and interest) payment on a 30-year, fixed-rate mortgage of $265,000 at 6.75% annual interest. STEPS KEYSTROKES Clear calculator Enter loan amount Enter term Enter interest Find monthly P&I payment oo 2 6 5 ) l* 30T 6•75ˆ p DISPLAY 0.00 265,000.00 30.00 6.75 “run” 1,718.78 *Note: Use the ) key to save keystrokes. What is the new payment, if the interest rate is lowered to 6.
Finding the Interest Rate Find the interest rate on a mortgage where the loan amount is $98,500, the term is 30 years, and the payment is $1,150 a month. STEPS KEYSTROKES Clear calculator Enter loan amount Enter term Enter monthly payment Find annual interest Find periodic interest oo 98500l 30T 1150p ˆ ˆ DISPLAY 0.00 98,500.00 30.00 1,150.00 “run” 13.78 1.
Paying Off a Mortgage Early (Making Larger Payments) How long does it take to pay off a 30-year, fixed-rate mortgage of $150,000 at 8.5% interest if you add an extra $200 to the mortgage payment each month? STEPS KEYSTROKES Clear calculator Enter loan amount Enter interest Enter term Find monthly P&I payment Add additional payment amount Enter as new payment amount Find reduced loan term oo 150)l 8•5ˆ 30T p DISPLAY 0.00 150,000.00 8.50 30.00 1,153.37 +200= 1,353.37 p T 1,353.37 “run” 18.
Future Value Given any four components to a problem that includes a future value, you can calculate the fifth. Appreciation You purchased a home for $350,000 and want to know its value in 3 years, figuring an inflation or appreciation rate of 6%. (Set periods to one per year.
Non-Monthly Loans Most residential real estate loans are based on a monthly payment schedule. However, if you have a non-monthly loan, you must change the number of payments per year using a two-key sequence: s ÷. For example, here's how to set your calculator to four payments per year. STEPS KEYSTROKES Clear calculator Enter # of payments/year oo 4s÷ DISPLAY 0.00 4.00 To recall the currently stored number of payments: STEPS KEYSTROKES Clear calculator oo Recall # of payments/year ® ÷ DISPLAY 0.
Sales Price/Down Payment One of the unique features of this calculator is its ability to work with not only Loan Amount, but with Sales Price and Down Payment. You can enter two values to find the third (e.g., enter Price and Down Payment to find Loan Amount). You may also enter the down payment in both percent or dollar format. For example, to enter 20%, enter 20 and press the d key (you do not have to label it as a percent). Or enter $20,000 (e.g., 2 0 ) d).
Taxes and Insurance This calculator has keys that store your estimated local annual Property Tax, Property Insurance, and Mortgage Insurance (if applicable) rates or dollar figures. This allows you to calculate the PITI (Principal, Interest, Tax, and Insurance) payment, in addition to the regular P&I payment. You may also enter monthly expenses, such as homeowner’s association dues—these are included in the calculation of the total payment (PITI plus expenses).
Setting Tax and Insurance Percent Rates Enter an annual property tax rate of 1.5%, a property insurance rate of 0.25%, and a mortgage insurance rate of 0.50%: STEPS KEYSTROKES Set property tax rate 1•5t Set insurance rate •25I Set mortgage insurance rate • 5 s I DISPLAY 1.50 0.25 0.50 Recalling Tax and Insurance Percent Rates Recall your stored rates: STEPS KEYSTROKES Recall tax rate ®t Recall insurance rate ®I Recall mortgage insurance rate ®sI DISPLAY 1.50 0.25 0.
Calculating Tax and Insurance Percent or Dollar Amounts If loan variables are entered in addition to tax and insurance percentage rates or dollar values, the respective dollar values or percentage rates can be computed by simply pressing the applicable keys a second time. For example, enter an annual property tax rate of 1.5%, a property insurance rate of 0.25% and a mortgage insurance rate of 0.50%. Then enter a sales price of $250,000, 10% down, a term of 30 years and an interest rate of 8%.
PITI Payment (Tax and Insurance Entered as Percent) Find the PITI payment on a 30-year, 6.5% mortgage if the home’s selling price is $325,000 and the down payment is 5%. Annual property taxes are estimated at 1.3%, annual property insurance at 0.25%, and annual mortgage insurance at 0.45%.
(Cont’d) STEPS KEYSTROKES Find P&I payment p Find PITI payment p Find total payment (PITI plus monthly expenses) p Find interest-only payment p DISPLAY “run” 1,681.74 2,315.07 2,465.07 1,402.50 Estimated Income Tax Savings and “After-Tax” Payment Important Note: This example estimates the annual tax savings (including property tax and mortgage interest). It is important to inform your clients to consult a tax advisor for an accurate income tax deduction computation for their particular tax situation.
Rent vs. Buy If your client is currently renting a home for $1,250/month, what is the comparable home sales price and loan amount that he or she could afford? What is the estimated annual and monthly income tax savings, if they were to finance this mortgage? The current rate is 7.5% on a 30-term Fixed-Rate Mortgage, and your client can afford to put 10% down. You estimate local taxes at 1.25% and property insurance at 0.35%. Your client is in the 21% tax bracket.
Adjustable Rate Mortgages Using the A key, you can quickly find the “adjusted” (increasing or decreasing) payments for future years on fully and partially amortized Adjustable Rate Mortgages. Here are some notes on Solving ARM loans using this calculator: 1. You solve the initial ARM payment just as you would for any standard, fixed-rate loan — the ARM function is only used for “adjusted” periods. 2.
ARM Payment — Worst-Case Scenario Find the initial monthly payment on a 30-year, $176,000 mortgage at 8.25% annual interest rate, and then find the second and third year's “worst-case” adjusted payments if this ARM loan increases 0.5% at the end of each year. Then, find the remaining loan balance, current interest rate and term.
ARM Payment — Using Lifetime Cap Using the previous mortgage, add a lifetime cap of 4% and find the adjusted payments through year ten. You will need to re-enter the loan amount, term and interest.
Decreasing ARM Payment Calculate the initial monthly payment on a 30-year, $250,000 ARM loan at 5% interest, and then find the second and third years' adjusted payments if the loan's interest rate decreases 1% at the end of each year. STEPS KEYSTROKES Clear calculator Enter loan amount Enter term in years Enter annual interest Find initial monthly payment Enter ARM parameters Find 1st lower ARM payment* Find 2nd lower ARM payment* oo 250)l 30T 5ˆ p 1:1sA DISPLAY 0.00 250,000.00 30.00 5.00 “run” 1,342.
Amortization and Remaining Balance The amortization function is quick and simple. It allows you to find total interest, principal, and remaining balance for an entire loan, for an individual payment or individual year, or any range of payments or range of years, for fully or partially amortized loans. It also lets you quickly compute the mortgage interest deduction (as an estimate) for your clients. Notes on Amortization 1.
(Cont’d) 6. If the first payment of a loan begins in a month other than January, you can use the Month Offset function. The default for this setting is 1 (for January). To change the start month from January, enter the month number (e.g., 2 for February), then the s and ) keys. This allows you to calculate the correct number of periods in the amortization range. As another example, if the first payment of a loan begins in April, the value stored in the month offset would be 4 (press 4 s )).
Amortization List for Individual Year(s) — Using “Next” Feature How much total interest and principal will you pay on a 30-year, $90,000 loan at 8% interest during the first year? The second year? Third year, etc.? First, find monthly payment to “set-up” this loan. The calculator will automatically advance to the next year upon subsequent presses of a. Note: The mortgage interest tax deduction is based on the default tax bracket of 28% unless you have changed it via s +.
Amortization List for Individual Year(s) — Using Month Offset The first payment of a loan begins in May. How much total interest and principal will you pay on a 30-year, $90,000 loan at 8% interest during the first year? The second year? Third year, etc.? (First find monthly payment to “set-up” this loan.) Note: The mortgage interest tax deduction is based on the default tax bracket of 28% unless you have changed it via s +.
Amortization List for Individual Payment(s) For a $175,000 loan at 6.85% interest for 30 years, find out how much interest and how much principal you’ll pay in the first and second payments. Note: Use the s b keys to label the payments.
Amortization List for a Range of Payments or Years For a $225,000, 30-year loan at 7.4% interest, find out how much interest and principal you'll pay in payments 1-9, and then for years 1-10. STEPS KEYSTROKES DISPLAY Clear calculator oo 0.00 Enter loan amount 225)l 225,000.00 Enter interest 7•4ˆ 7.40 Enter term 30T 30.00 Find monthly P&I payment p “run” 1,557.85 Enter Payments #1-9 1:9sba “run” 1-9 Find interest a 12,449.13 Find principal a 1,571.56 Total principal and interest a 14,020.
APR and Total Finance Charges Calculating the Annual Percentage Rate (APR) and Total Finance Charges (TFC) is performed in two steps: (1) you set up the loan just like any other problem (that is, enter three known variables and solve for the fourth) and (2) combine points and fees and press s ˆ (APR) to solve APR. If you continue to press ˆ, the calculator will also display the total finance charges, and a third press will display total finance charges plus principal (total cost of loan).
Prepaid/Odd-Days Interest and APR Find the monthly payment on a $100,000 loan at 8.25% annual interest and 30-year term. Then, find the amount of odd-days interest, or “prepaid” interest due, if the escrow closes on 7/21/03 and the first payment is due 8/1/03. STEPS KEYSTROKES Clear calculator Enter loan amount Enter interest Enter term Find monthly P&I payment Find days between escrow date of 1st payment Find the prepaid interest due at closing DISPLAY oo 0.00 100)l 100,000.00 8•25ˆ 8.25 30T 30.
Balloon Payment/Remaining Balance Needed to Pay Off a Loan You’re looking at a new home with the following financing available: Loan amount $225,000 at 6.75% amortized over 30 years but due and payable after 10 years. What is the balloon payment (remaining balance) after 10 years? STEPS KEYSTROKES Clear calculator oo Enter the loan amount 225)l Enter interest 6•75ˆ Enter term 30T Find monthly payment p Find balloon/remaining balance after 10 years 10sa DISPLAY 0.00 225,000.00 6.75 30.00 “run” 1,459.
Bi-Weekly Term Reduction and Payment Find the monthly P&I payment on a 30-year, $275,000 mortgage at 5.88% annual interest. Then convert it to a Bi-Weekly and find out how many years it will take to pay off this loan, the total interest savings, the total interest and principal paid (as a comparison to the regular loan), and the Bi-Weekly payment.
Purchase Price of a Note — Fully Amortized The mortgage you are thinking about buying has the following terms and conditions: 15 years remaining, $100 per month incoming payments, and you want a 25% yield or return on your investment. In this case you are paying for the income stream — the incoming payments — and not the future value. STEPS KEYSTROKES Clear calculator Enter desired yield Enter term Enter payment amount Find purchase price oo 25ˆ 15T 100p l DISPLAY 0.00 25.00 15.00 100.00 “run” 4,682.
(Cont’d) — DO NOT CLEAR CALCULATOR — What should you pay for this trust deed if you want an 18% yield on your investment? STEPS KEYSTROKES Enter your desired yield Find purchase price 18ˆ l DISPLAY 18.00 “run” 5,530.99 Finding the Value and Discount of a Trust Deed Determine the value and discount required for a $75,000 mortgage, payable at $937.50 per month, bearing interest at 11% per year, due in seven years.
BUYER QUALIFYING The Qualifying keys were designed specifically for mortgage lenders/brokers, for doing instant pre-qualifications on the phone or in front of clients. Real estate agents/brokers can also quickly pre-qualify clients so they can show them homes in their affordable price range. You can pre-qualify for a standard, fixed-rate P&I loan or an InterestOnly loan.
(Cont’d) 5. When calculating Annual Income Required (based on entered loan amount or sales price, term, interest and stored qualifying ratios), the first press of q or Q will display your stored ratios, the second press in succession will display the Annual Income Required, and the third press in succession will show the Allowable Monthly Debt. 6. When calculating buyer's Actual Ratios based on entered borrower data (i.e., income and debt) and property data (i.e.
QUALIFYING EXAMPLES Most of the examples in this section will be based on the default Income and Debt Ratios of 28% and 36%, respectively, which are stored in the q key. Recalling Income/Debt Qualifying Ratios Recall stored 28%-36% and 29%-41%ratios: STEPS KEYSTROKES Clear calculator Recall qualifying ratios 1 Recall qualifying ratios 2 oo ®q ®Q DISPLAY 0.00 28.00-36.00 31.00-43.
Finding Qualifying Loan Amount and Sales Price (Simple Example Excluding Tax/Insurance) Given an interest rate of 7.5%, a term of 30 years, and the stored q 28%:36% qualifying ratios, for what size loan and what sales price can a buyer qualify for if he or she makes $75,000 annually and has $500 in long-term monthly debt? The buyer plans to put $35,000 down.
Qualifying Loan Amount and Sales Price (Complete Example Including Down Payment, Tax/Insurance, Monthly Association Dues) The same buyers as in the previous example (who make $75,000 annually and have $500 in long-term monthly debt) wish to buy a lower-priced home and can only put $5,000 down. If you include estimated annual property taxes and insurance of 1.5% and 0.25%, respectively, a mortgage insurance rate of 0.
“Restricted” Qualifying Buyers who make $68,000 annually and have $750 in long-term monthly debt wish to buy a home offered at $175,000. They can only afford $5,000 for the down payment. For what maximum loan amount can they qualify? (Use previously stored 7.5% interest, 30year term, Tax/Ins./Mtg. Ins. rates of 1.5%, .25% and 0.6%, respectively, and qualifying ratios of 28%:36%. Re-enter 0.6% mortgage insurance rate, $50 assn. dues and $5,000 down.
Qualifying Comparison (Comparing 2 Different Loans or Ratios at Once) Given a buyer's annual income of $60,000, $500 in long-term monthly debt, estimated monthly homeowner’s association dues of $50, an interest rate of 6.25% and term of 30 years, what loan amounts can they qualify for based on both 28%:36% and higher 29%:41% ratios? Also, find the corresponding total monthly payment for each. Estimate property tax/insurance rates of 1.25% and .3%, respectively, and a mortgage insurance rate of .45%.
Qualifying Loan Amount (Interest-Only Loan) Using the same values from the previous example, find qualifying loan amount, price, and total payment for an interest-only loan: STEPS KEYSTROKES Clear Enter income Enter debt Enter down Set tax% Set ins% Set MI% Enter association dues Enter interest Enter term Display ratios Find qualifying loan amount Find price oo 75)i 500D 5)d 1•5t •25I •6sI 0.00 75,000.00 500.00 5,000.00 1.50 0.25 0.60 50e 6•75ˆ 30T sq 50.00 6.75 30.00 28.00 - 36.
Finding Income Required and Allowable Monthly Debt Using the stored q 28%:36% ratios, how much income would a buyer need to finance a $250,000 home if they put 20% down? What is the maximum allowable debt? What is the dollar down payment and loan amount? What is the monthly payment? Use 6.75% interest for 30 years. Estimate property tax/insurance rates of 1.5% and 0.25%, respectively. Clear mortgage insurance rate to zero, as they are putting 20% down.
Solving for Actual Qualifying Ratios A buyer who makes $120,000 annually and has $550 in long-term monthly debt wants to borrow $275,000 to purchase a home. He has $68,750 for the down payment and the property tax/insurance rates are estimated at 1.4% and 0.2%, respectively; monthly homeowner’s association dues are $65. Use 6.5% interest for 30 years.
1ST AND 2ND TRUST DEEDS (COMBO LOANS) Your calculator figures Combo loans, or 1st and 2nd Trust Deeds, which are common financing options for clients with smaller down payments, who want to avoid mortgage insurance. The benefit of Combo loans over single, fixed-rate loans with mortgage insurance is that the buyer can actually save money obtaining two loans vs. a single, larger loan requiring monthly mortgage insurance.
Combo Loan (80:10:10) vs. Fixed-Rate Loan with Mortgage Insurance You’d like to show your client the savings of a fixed-rate Combo Loan (80:10:10) over that of a standard, fixed-rate loan with mortgage insurance, or MI. You have the following parameters: Loan Amount Interest Term PMI LTV STEPS FIXED-RATE LOAN w/PMI 100,000 7% 30 2.5% 90% FIXED-RATE COMBO LOAN (1st TD – 2nd TD) 100,000 8% – 10% 30 year – 10 year -80% – 10% KEYSTROKES DISPLAY 1.
(Cont’d) STEPS KEYSTROKES DISPLAY 3. Find 80:10:10 Combo Loan and Comparison Values (vs. FixedRate Loan with Mortgage Insurance): Find 1st:2nd combined (blended) interest rate * 8.11 Find equivalent interest rate of single, fixed-rate loan with mortgage insurance * 9.95 Find total combined (1st/2nd) payment * 799.07 Find equivalent payment of single, fixed-rate loan with mortgage insurance * 873.64 Find monthly savings over fixed-rate loan with mortgage insurance * 74.
Combo Loan (Interest-Only 2nd TD) vs. Fixed-Rate Loan with Mortgage Insurance You’d like to show your client the savings of a Combo Loan (fixedrate 1st TD and an Interest-Only 2nd TD) over that of a standard, fixed-rate loan with mortgage insurance. You have the following parameters: Loan Amount Interest Term MI LTV STEPS FIXED-RATE LOAN w/MI FIXED-RATE COMBO LOAN (1st TD – 2nd TD) 100,000 7% 30 .5% 90% 100,000 7% – 9% 30 year – 30 year -80% – 10% KEYSTROKES DISPLAY 1.
(Cont’d) STEPS KEYSTROKES DISPLAY 3. Find 80:10:10 Combo Loan with an Interest-Only 2nd TD and Comparison Values (vs. Fixed-Rate Loan with Mortgage Insurance): Find 1st:2nd blended interest rate s* “run” 7.14 Find equivalent interest rate of single, fixed-rate loan with MI * “run” 7.61 Find total combined (1st/2nd) payment * 674.71 Find equivalent payment of single, fixed-rate loan with MI * 706.97 Find monthly savings over fixed-rate loan with MI * 32.
Combo Loan — Entering a New LTV You’d like to show your client the savings of a fixed-rate Combo Loan (80:20) over that of a standard, fixed-rate loan with Mortgage Insurance. You have the following parameters: Loan Amount Interest Term MI LTV STEPS FIXED-RATE LOAN w/MI FIXED-RATE COMBO LOAN (1st TD – 2nd TD) 100,000 7% 30 .5% 100% 100,000 7% – 9% 30 year – 30 year -80% – 20% KEYSTROKES DISPLAY 1. Enter Fixed-Rate Loan Values and Find Total Payment: Clear calculator oo 0.
(Cont’d) STEPS KEYSTROKES DISPLAY 3. Find 80:20 Combo Loan and Comparison Values (vs. Fixed-Rate Loan with Mortgage Insurance): Enter LTV and find 1st:2nd blended interest rate 80:20* “run” 7.41 Find equivalent interest rate of fixed-rate loan with MI * “run” 7.61 Find total combined (1st/2nd) payment * 693.17 Find equivalent payment of fixed-rate loan with MI * 706.97 Find monthly savings over fixed-rate loan with MI * 13.80 Find adjusted 2nd term (if savings applied to 2nd TD) * “run” 21.
Financed Mortgage Insurance compared to a Combo Loan Financed Mortgage Insurance loans allow for higher than 80% LTV on a straight first loan because the Mortgage Insurance added to the loan amount. Another benefit to the Financed MI loan is the interest is tax deductible. In some cases the Financed MI loan may be better than a combo loan. We will compare a Financed Mortgage Insurance loan to a Combo Loan, with a loan amount of $90,000.
(Cont’d) STEPS KEYSTROKES DISPLAY 4. Enter Combo Loan Values: Enter 1st TD Interest:Term 6:30! Enter 2nd TD Interest:Term 8:30s! 5. Solve Combo Loan for comparison: Find 1st:2nd blended interest rate * Find equivalent interest rate of financed MI loan * Find total combined (1st/2nd TD) payment * Find equivalent payment of of financed MI loan * Find Combo monthly savings over financed MI loan * 6.00-30.00 8.00-30.00 “run” 6.23 “run” 6.06 553.02 542.94 -10.
APPENDIX Default Settings Performing a total Reset (see below) will return the calculator to the following default settings: • • • • • • • • • • • Two Fixed Decimal Places 12 Periods per Year = Reset to 12 Upon O Property Tax/Insurance = Values Cleared Upon O Mortgage Insurance.
Auto Shut-Off Your calculator is designed to shut itself off after about 8-12 minutes of non-use. Batteries Should the display become very dim or erratic, replace the batteries. Batteries Included: Two LR44 (1.5V) batteries Battery-Life (Actual Use): 1,000 hours ✓ Note: Please use caution when disposing of your old batteries, as they contain ❑ hazardous chemicals. Replacing the Batteries: Slide open and remove the battery door (located on upper backside of calculator). Remove the old batteries.
Warranty Warranty Repair Service – U.S.A. Calculated Industries (“CI”) warrants this product against defects in materials and workmanship for a period of one (1) year from the date of original consumer purchase in the U.S. If a defect exists during the warranty period, CI at its option will either repair (using new or remanufactured parts) or replace (with a new or remanufactured calculator) the product at no charge.
Disclaimer CI MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCT’S QUALITY, PERFORMANCE, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. AS A RESULT, THIS PRODUCT, INCLUDING BUT NOT LIMITED TO, KEYSTROKE PROCEDURES, MATHEMATICAL ACCURACY AND PREPROGRAMMED MATERIAL, IS SOLD “AS IS,” AND YOU THE PURCHASER ASSUME THE ENTIRE RISK AS TO ITS QUALITY AND PERFORMANCE.
INDEX 1ST AND 2ND TRUST DEEDS (COMBO LOANS), 61 1st/2nd TD (Combo Loan) Keys, 11 Actual Qualifying Ratios, Solving for, 60 Adjustable Rate Mortgages, 35 Amortization and Remaining Balance, 39 Amortization List for a Range of Payments or Years, 44 Amortization List for Individual Payment(s), 43 Amortization List for Individual Year(s)—Using “Next” Feature, 41 Amortization List for Individual Year(s)—Using Month Offset, 42 Appendix, 70 Appreciation, 26 Appreciation for a Home (Add-on %), 14 ARM Payment—Using
Mortgage Loan (TVM) Keys, 2 MORTGAGE LOANS/TIME-VALUE-OF-MONEY (TVM) EXAMPLES, 22 Non-Monthly Loans, 27 Odd-Days Interest and APR, 46 Paying Off a Loan Early (Making Larger Payments), 25 Percentage Calculations, 13 PITI Payment (Tax and Insurance Entered as %), 32 Preference Settings, 17 Qualifying Comparison, 57 QUALIFYING EXAMPLES, 53 Qualifying Keys, 8 Qualifying Loan Amount and Sales Price, Finding, 54 Qualifying Loan Amount and Sales Price--Complete Example, 55 Quarterly Payment, Finding a, 27 Reductio
Designed in the United States of America Printed in China UG3416E-A 1/06
