QUALIFIER PLUS IIIFX ® ADVANCED RESIDENTIAL REAL ESTATE FINANCE CALCULATOR with CASH FLOW and COMPLETE BUYER QUALIFYING Model 3430 • Qualifier Plus ® IIIFX Model 43430 • Qualifier Plus ® IIIFX Desktop
Introducing the QUALIFIER PLUS® IIIFX Mortgage Loan Calculator The new QUALIFIER PLUS IIIFX was custom-designed for mortgage lenders and residential real estate pro’s. With the push of a few buttons, it will quickly pre-qualify prospective buyers and solve hundreds of mortgage loan problems! It also operates as an easy-to-use financial calculator, with user-friendly cash flow keys for analyzing real estate investments, and TVM keys to analyze retirement/savings scenarios.
TABLE OF CONTENTS GETTING STARTED..........................................................................5 KEY DEFINITIONS .........................................................................5 Basic Operation Keys ..................................................................5 Mortgage Loan (TVM) Keys.........................................................6 Tax, Insurance and Expense Keys ............................................10 Tax Savings Keys.............................................
Total Payment (Including Expenses) and Interest-Only Payment..................................................................................34 Amortization and Remaining Balance........................................35 Notes on Amortization................................................................35 Total Principal and Interest for a 30-Year Loan .........................37 Balloon Payment/Remaining Balance Needed to Pay Off a Loan....................................................................
Qualifying Loan Amount and Sales Price (Complete Example Including Down Payment, Tax/Insurance, Monthly Association Dues) ......................................................................................61 “Restricted” Qualifying ...............................................................62 “Unrestricted” Qualifying ............................................................63 Qualifying Comparison (Comparing Two Different Loans or Ratios at Once)...................................................
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 Appendix on page 81 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. 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.
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 year is entered 1 : 1 A; an ARM which decreases 1% per year is entered 1 : 1 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): s7 Property Tax (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, pressing ® 7 converts to the monthly tax amount, and pressing ® 7 again converts to the annual percentage rate.
(Cont’d) Note: Entering a number equal to or less than 10 is assumed to be an annual percent. Mortgage insurance is calculated from the loan amount. 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 percent of sales price or loan amount, these items will automatically be re-calculated if sales price or loan amount is changed. e Expense — Used for calculating Total Payment and Qualifying.
Rent vs. Buy Keys sP Rent vs. Buy — Calculates a comparable sales price, loan amount, and mortgage payment versus the cost of monthly rent. You must enter loan variables (and a tax bracket via s +), then enter the prospective buyer’s current rent and press s P. Consecutive presses of P will calculate the comparable sales price, loan amount, monthly loan payment (including tax/insurance, if entered), and estimated annual/monthly income tax savings.
(Cont’d) DEBT RATIO = TOTAL HOUSING EXPENSE + MO. DEBT GROSS MONTHLY INCOME Note: Typically, when figuring government loans (FHA/VA), these formulas also include estimated expenses for maintenance and utilities (added to the Total Housing Expense for both ratios). Also, real estate financing and qualifying varies per region and by lender, who of course, take other factors into consideration, such as a buyer’s credit and employment history.
(Cont’d) *Note: The Maximum Qualifying Loan Amount is the “restricted” loan amount the buyer may qualify for. This loan amount is based on whichever of the two ratios — income or debt — limits the buyer the most. The Unrestricted Qualifying Loan Amount, however, is the higher loan amount. This loan amount is based on whichever of the two ratios — income or debt — limits the buyer the least. In other words, whichever ratio will give the buyer the highest qualifying loan amount.
1st & 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 (MI), 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) Press Display or 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 Monthly Savings over Fixed-Rate Loan with Mortgage Insurance 6 Adjusted 2nd Term (if Savings Applied to 2nd TD) 7 1st Trust Deed Loan Amount 8 2nd Trust Deed Loan Amount 9 1st Trust Deed Payment 10 2nd Trust Deed Payment 11 Displays LTV ! 1
sc Frequency (Freq) —The second function of this key labels a cash flow that is repeated consecutively, or grouped (e.g., if a cash flow is repeated three times in a row, first enter the cash flow value into the c key, then enter the frequency, or number of occurrences (3 s c). Note: to use the Frequency function, a cash flow must repeat itself consecutively.
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 5 4 3 2 1 0 • 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 Description (Press + to Advance within each category, – to Back up): 4 Mortgage Insurance (MI) - Clr-Clr M Ins — Clears mortgage insurance (% and $) upon o o. (Default) - Clr OFF M Ins — Clears mortgage insurance (% and $) at O. - HOLD Pct. M Ins — Holds only percent (%) mortgage insurance entry at O. - HOLD ALL M Ins — 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-M5) In addition to the standard cumulative Memory (as described above), your calculator has six independent Storage Registers — M0 through M5 — 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-M5 (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-M5.
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 calculating 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 in years Enter annual Interest rate 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 Term of a Loan How long does it take to pay off a loan of $15,000 at 10% interest if you make payments of $200 each month? STEPS KEYSTROKES Clear calculator Enter Loan Amount Enter annual Interest rate Enter monthly Payment Find Term in years Find periodic Term oo 15)l 10ˆ 200p T T DISPLAY 0.00 15,000.00 10.00 200.00 “run” 9.85 118.19 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.
Simple Interest vs. Compound Interest If you borrow $5,000 at 6% simple interest, how much will you owe at the end of 5 years? Note: This is a simple math problem and does not require the use of TVM keys. STEPS KEYSTROKES Clear calculator Multiply loan amount by interest Multiply by term Add original loan amount oo DISPLAY 0.00 5)x6%= x5= +5)= 300.00 1,500.00 6,500.
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 home-owner’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•5s7 Set insurance rate •25s8 Set mortgage insurance rate • 5 s 9 DISPLAY 1.50 0.25 0.50 Recalling Tax and Insurance Percent Rates Recall your stored rates: STEPS KEYSTROKES Recall tax rate ®7 Recall insurance rate ®8 Recall mortgage insurance rate ®9 DISPLAY 1.50 0.25 0.
Calculating Tax and Insurance Percent or Dollar If loan variables are entered in addition to tax and insurance percentage rates or dollar values, the respective dollars 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 %) Find the monthly 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%. STEPS KEYSTROKES Clear calculator Enter Term in years Enter annual Interest rate Enter sales Price Enter Down Payment Enter Tax rate Enter property Insurance rate Enter Mortgage Ins.
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 )).
Total Principal and Interest for a 30-Year Loan How much total interest will you pay on a $300,000 loan at 7.5% interest over 30 years? What is the total principal and interest paid? STEPS KEYSTROKES Clear calculator Enter Loan Amount Enter annual Interest rate Enter Term in years Find monthly P&I Payment Find total # of payments Find total interest paid Find total principal paid Find total principal/interest oo 300)l 7•5ˆ 30T p a a a a DISPLAY 0.00 300,000.00 7.50 30.00 “run” 2,097.
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 the monthly P&I 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 the monthly P&I 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 specify payments (periods).
Amortization List for a Range of Payments For a $225,000, 30-year loan at 7.4% interest, find how much interest and principal you'll pay in payments 1-9. STEPS KEYSTROKES DISPLAY Clear calculator oo 0.00 Enter Loan Amount 225)l 225,000.00 Enter annual Interest rate 7 • 4 ˆ 7.40 Enter Term in years 30T 30.00 Find monthly P&I Payment p “run” 1,557.85 Enter Payments #1-9 1 : 9 s b a* “run” 1-9 Find interest paid a 12,449.13 Find principal paid a 1,571.56 Total principal and interest a 14,020.
Bi-Weekly Loans Your calculator includes a Bi-Weekly loan function (s T) which allows you to convert established, fully amortized monthly loans into Bi-Weeklies (in which one-half the monthly payment is made every two weeks). Because you make two extra half-payments per year (i.e., 26 Bi-Weekly payments is like making 13 payments/year), these kinds of loans can amount to large interest savings and a substantial reduction in the time it takes to pay them off.
(Cont’d) Now Solve for the Bi-Weekly Loan and Compare Interest Savings and Total Interest/Principal Paid: STEPS KEYSTROKES Find Bi-Weekly Term Find total interest savings Find total interest paid Find total principal Find total principal and interest Find Bi-Weekly P&I Payment Clear calculator** sT T T T “run” 24.60 65,430.46* 245,508.33 275,000.00 DISPLAY T p oo 520,508.33 813.80 0.00 *Notice you save a significant amount (over $65K in this example) with a Bi-Weekly.
Retirement Savings Account Problem (Future Value of an Initial Deposit or Lump Sum) If you invest $50,000 today into an IRA with an 8% yield (compounded monthly), what is the future value in 25 years? What will it be worth in 30 years? STEPS KEYSTROKES Clear calculator oo Recall payments/year* ®÷ Enter deposit into Loan Amt (present value) 50)l Enter Interest rate 8ˆ Enter Term in years 25T Find future value sl Enter new Term in years 30T Find new future value sl DISPLAY 0.00 12.00 50,000.00 8.00 25.
(Cont’d) Find future value in 30 years: STEPS KEYSTROKES DISPLAY Enter Term in years 30T Recalculate value in 30 years sl Access Beginning Mode via Preference Settings s = (press = seven times) Set back to End Mode + 30.00 -613,543.75** TYP BEG TYP END *Calculator must be set to default of 12 periods per year, for compounding monthly. If it isn’t, enter 1 2 s ÷. **Ignore the negative sign; in this case, it is a positive value.
Finding a Quarterly Payment Find the quarterly P&I payment on a ten-year loan of $15,000 with an annual interest rate of 12%. STEPS KEYSTROKES Clear calculator oo Set to four payments/year 4 s ÷ Enter Loan Amount 15)l Enter Term in years 10T Enter annual Interest rate 1 2 ˆ Find quarterly P&I Payment p Reset to 12 payments/year 1 2 s ÷ DISPLAY 0.00 4.00 15,000.00 10.00 12.00 “run” 648.94 “run” 12.
Finding the Yield on a Discounted Note An individual wants to sell you a note under the following terms: 60 months remaining in the term, a face amount when due of $7,500, 10% interest-only payments of $62.50 (incoming). He says he will sell this note to you for $6,500 if you buy today.
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. STEPS KEYSTROKES Clear calculator Store Loan Amount in Memory Enter monthly Payment Enter Term in years Enter annual Interest rate Calculate remaining balance oo 7 9 7 1 5)lµ 37•5p T 1ˆ sl DISPLAY 0.00 M 75,000.00 937.50 7.00 11.00 43,576.
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.
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.
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 P&I 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 1% at the end of each year. Then, find the remaining loan balance, current interest rate and remaining term.
ARM Payment — Using Lifetime Cap Using the previous mortgage, add a lifetime cap of 4% and find the adjusted payments through year six. You will need to re-enter the loan amount, term and interest.
Decreasing ARM Payment Calculate the initial monthly P&I 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 DISPLAY Clear calculator Enter Loan Amount Enter Term in years Enter annual Interest rate Find initial monthly P&I Payment Enter ARM parameters Find 1st lower ARM payment* Find 2nd lower ARM payment* oo 250)l 30T 5ˆ 0.00 250,000.00 30.00 5.
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. Buyers in a 28% income tax bracket are looking to finance a $150,000 mortgage for 30 years at 8% annual interest.
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 28% tax bracket.
BUYER PRE-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 prequalify clients so they can show them homes in their affordable price range.
(Cont’d) 4.
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 29.00-41.
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 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, 1.5% property tax, .25% property insurance, and qualifying ratios of 28%:36%. Re-enter 0.6% mortgage insurance rate, $50 association dues and $5,000 down.
(Cont’d) “Unrestricted” Qualifying The amount calculated in the previous example is the loan they may qualify for, based on current income and debt and the standard 28%-36% qualifying ratios. What are the buyer's actual income and debt ratios? What does the “unrestricted” loan amount calculate to, and which side is it based on (e.g.
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%.
Finding Income Required and Allowable Monthly Debt Using the 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 $ 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 also 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. You have the following parameters: Loan Amount Interest Term MI LTV 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% STEPS 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 * “run” 7.23 Find equivalent interest rate of single, fixed-rate loan with MI * “run” 7.61 Find total combined (1st/2nd) payment * 680.78 Find equivalent payment of single, fixed-rate loan with MI * 706.97 Find monthly savings over fixed-rate loan with MI * 26.19 Find adjusted 2nd term (if savings applied to 2nd TD) * “run” 14.
Combo Loan (80:15:5) vs. Fixed-Rate Loan with Mortgage Insurance You’d like to show your client the savings of a fixed-rate Combo Loan (80:15:5) over that of a standard, fixed-rate loan with mortgage insurance. You have the following parameters: Loan Amount Interest Term MI LTV FIXED-RATE LOAN w/MI FIXED-RATE COMBO LOAN (1st TD – 2nd TD) 100,000 7% 30 .5% 95% 100,000 7% – 9% 30 year – 30 year -80% – 15% STEPS KEYSTROKES DISPLAY 1.
(Cont’d) STEPS KEYSTROKES DISPLAY 3. Find 80:15:5 Combo Loan and Comparison Values (vs. FixedRate Loan with Mortgage Insurance): Find 1st:2nd blended interest rate s* “run” 7.33 Find equivalent interest rate of single, fixed-rate loan with MI * “run” 7.61 Find total combined (1st/2nd) payment * 687.30 Find equivalent payment of single, fixed-rate loan with MI * 706.97 Find monthly savings over fixed-rate loan with MI * 19.67 Find adjusted 2nd term (if savings applied to 2nd TD) * “run” 18.
Combo Loan — Entering a New LTV You’d like to show your client the savings of a fixed-rate Combo Loan (90:5:5) over that of a standard, fixed-rate loan with MI. You have the following parameters: Loan Amount Interest Term MI LTV FIXED-RATE LOAN w/MI FIXED-RATE COMBO LOAN (1st TD – 2nd TD) 100,000 7% 30 .5% 95% 100,000 7% – 9% 30 year – 30 year -90% – 5% STEPS KEYSTROKES DISPLAY 1. Enter Fixed-Rate Loan Values and Find Total Payment: Clear calculator oo 0.00 Enter Loan Amount 100)l 100,000.
(Cont’d) STEPS KEYSTROKES DISPLAY 3. Find 90:5:5 Combo Loan and Comparison Values (vs. Fixed-Rate Loan with Mortgage Insurance): Enter LTV and find 1st:2nd blended interest rate 90:5* “run” 7.11 Find equivalent interest rate of fixed-rate loan with MI * “run” 7.61 Find total combined (1st/2nd) payment * 672.64 Find equivalent payment of fixed-rate loan with MI * 706.97 Find monthly savings over fixed-rate loan with MI * 34.33 Find adjusted 2nd term (if savings applied to 2nd TD) * “run” 8.
Finance 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 many 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.
CASH FLOW EXAMPLES Your calculator has easy-to-use cash flow keys for performing real estate investment, or cash flow analysis. Cash Flow Entry The Cash Flow key can store up to 20 sequential, semi-permanent cash flows, including an Initial Investment, along with their corresponding Frequencies. The Cash Flow numbering begins at zero (C-Ø is displayed) and ends at 19 (C-19 is displayed), for a total of 20 individual Cash Flows.
IRR, NPV, and NFV Functions The R key is multifunctional, and consecutive presses calculate: • the annual Internal Rate of Return (IRR%); • the Net Present Value (NPV) of the entered cash flows, based on an entered desired Rate of Return, and the stored Payments per Year (default = 12); • the Net Future Value; and • (re-display of) the entered Rate of Return. Note: If you wish to skip directly to the NPV calculation, press s R.
Calculating IRR, NPV, and NFV for Annual Cash Flows A real estate investor wishes to purchase/finance a piece of property for $225,000. He’d like a return of 9% and expects to sell it after five years for $275,000. He expects the annual cash flows below. Find the IRR, NPV and NFV, and determine whether this investment is desirable. Note: since payments are expected to be received annually, you will need to set your Payments per Year to 1.
Calculating IRR, NPV, and NFV for Monthly Cash Flows A real estate investor wishes to purchase/finance a piece of property for $225,000. She’d like a return of 10% and expects to sell it after five years for $275,000. She expects the monthly cash flows below. Find the IRR, NPV and NFV, and determine whether this investment is desirable. Note: since payments are expected to be received monthly, you will need to set your Payments per Year to 12.
(Cont’d) Recalling and Replacing Cash Flows STEPS KEYSTROKES 1) Recall all cash flows and frequencies: Initial Cash Flow ®c 1st Cash Flow c 1st Cash Flow frequency c 2nd Cash Flow c 2nd Cash Flow frequency c 3rd Cash Flow c 3rd Cash Flow frequency c 4th Cash Flow c 4th Cash Flow frequency c DISPLAY C-0 -225,000.00 C-1 1,000.00 F-1 12.00 C-2 1,100.00 F-2 12.00 C-3 1,200.00 F-3 24.00 C-4 275,000.00 F-4 1.
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 = Values Cleared Upon o o Amortization Range = Specified Year (Ent-Ent) Qualifying Ratios Displayed 1st Month Offset to January (1) Tax Bracket = 28% Qual 1 Ratios = 28%-36% Qual 2 Ratios = 29%-41% Combo Loan 1st:2nd LTV = 80%:10%
Auto Shut-Off Your calculator is designed to shut itself off after about 8-12 minutes of non-use. Batteries • Qualifier Plus IIIFX (#3430) Two LR-44 batteries. • Qualifier Plus IIIFX Desktop (#43430) One 3-Volt Lithium CR-2032 battery. Replacing the Battery(ies) Should your calculator display become very dim or erratic, replace the battery(ies). Note: Please use caution when disposing of your old battery, as it contains hazardous chemicals.
Repair and Return Warranty, Repair and Return Information! Return Guidelines: 1. Please read the Warranty in this User’s Guide to determine if your Calculated Industries product remains under warranty before calling or returning any device for evaluation or repairs. 2. If your product won’t turn on, check the batteries as outlined in the User’s Guide. 3. If you need more assistance, please go to the website listed below. 4.
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), 67 1st/2nd TD (Combo Loan) Keys, 15 Actual Qualifying Ratios, Solving for, 66 Adjustable Rate Mortgages, 51 Amortization and Remaining Balance, 35 Amortization List for a Range of Payments or Years, 41 Amortization List for Individual Payment(s), 40 Amortization List for Individual Year(s) — Using “Next” Feature, 38 Amortization List for Individual Year(s) — Using Month Offset, 39 Appendix, 81 Appreciation, 43 Appreciation for a Home (Add-on %), 19 APR and Total
Qualifying Comparison, 64 QUALIFYING EXAMPLES, 59 Qualifying Keys, 12 Qualifying Loan Amount and Sales Price, Finding, 60 Qualifying Loan Amount and Sales Price — Complete Example, 61 Quarterly Payment, Finding a, 46 Real Estate Investment — Calculating IRR, NPV and NFV for Monthly Cash Flows, 79 Real Estate Investment — Calculating IRR, NPV and NFV for Annual Cash Flows, 78 Recalling and Replacing Cash Flow Frequencies, 80 Recalling and Replacing Cash Flows, 80 Reduction in Listing Price (Discount %), 19 R
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