7.
Key Index To find information about a specific key, refer to the page number next to the key.
BA Real Estateé FINANCIAL CALCULATOR GUIDEBOOK Guidebook Developed by: The staff of Texas Instruments Instructional Communications With Contributions 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 digital apparatus set out in the Radio Interference Regulations of the Canadian Department of Communications.
Table of Contents This guidebook begins with a section designed to help you quickly learn about the BA Real Estate TM calculator and its capabilities. The remainder of the book contains examples of and information about specific kinds of financial calculations. General calculator operation and service information are discussed in the Appendix. Getting Started Getting Started ....................................................................... 5 FInding the Monthly Payment on a Loan ....................
Chapter 3: Other Financial Tools Finding the Future Value of a Lump Sum.......................... 64 Saving for the Future with Regular Deposits.................... 66 Percent Change and Appreciation Model.......................... 69 Calculating Percent Change and Appreciation................. 70 Interest Conversion Model.................................................. 72 Annual Percentage Rate (APR) .......................................... 74 Finding the APR of a Refinanced Loan......................
Getting Started The examples on the following eight pages introduce you quickly to the major features of the BA Real Estate TM calculator. Try working the examples to find out how easy it is to solve real estate calculations! Before starting, however, perform the settings shown on this page to ensure that the examples give the expected results. Setting Beginning- or End-of-Period Payments The # , key sequence lets you alternate between beginning-of-period and end-of-period payments.
Finding the Monthly Payment on a Loan The TVM keys make it easy to enter at least three known values in a TVM (Time Value of Money) problem and then compute the unknown value. Suppose, for example, you want to know the monthly payment required for a 30-year, $130,000 mortgage loan at an annual percentage rate of 8%. 1. Clear any previous TVM values. Press # -. 0.00 2. Enter the term of the loan (30 years). Press 30 0. TRM= 30.00 I% = 8.00 LN = 130,000.00 PMT= -953.89 3.
Calculating Total Payment (PITI) Monthly house payments often include not only principal and interest (the payback on the loan), but also property taxes and insurance. Using the data you entered in the previous example, you can compute the total payment including principal, interest, taxes, and insurance (PITI). Assume that the local property-tax rate is 1.5% annually and the annual insurance rate is 0.5%. If the selling price of the house is $153,000, what will be the total monthly payment? 1.
Amortization for the First Year The Amortization model prompts you for the starting and ending payment numbers to define a range of payment periods. You can then use the TVM values you entered earlier to find the loan balance after the last payment and the total principal and interest paid in the range. Find the balance, principal, and interest after 12 payments. 1. To start Amortization, press %. P1 = 1.00 P2 = 1.00 P2 = 12.00 2. Enter the number of the first payment period (P1).
Finding a Pay-off Balance If the property is sold after 3.5 years, what amount will be required to pay off the loan? Use the Amortization model to find the balance after 3.5 years of payments. 1. To start Amortization, press %. P1 = 1.00 P2 = 1.00 P2 = 42.00 2. Enter the number of the first payment period (P1). Press 1 j to enter the value for P1 and advance to P2. 3. Calculate the number of payments in 3½ years , enter as P2, and compute balance, principal, and interest. Press 12 O 3.
Changing the Conditions of the Loan You can change any of the TVM values and then compute a new value. Using the values you entered on page 6, find the monthly payment at 9% interest. Then find the monthly payment at 9.5% for a 15-year loan. 1. Change the interest rate to 9%. Press 9 1. I% = 9.00 2. Compute the new payment at the higher interest rate. Press $ 3. PMT= -1,046.01 3. Change the interest rate to 9.5%. Press 9.5 1. I% = 9.50 TRM= 15.00 PMT= -1,357.49 4. Change the term to 15 years.
Estimating Appreciation You are buying a $150,000 home that is expected to appreciate for the next five years at 3% per year. Estimate the value of the house at the end of five years. 1. Enter the current price of the home (starting value). Press 150 q # 7. V1 = 150,000.00 2. Enter the expected annual appreciation rate. Press 3 # :. APP= 3.00 #PD= 5.00 3. Enter the number of periods (years). Press 5 # 9. 4. Calculate the expected value at the end of five years. Press $ # 8. V2 = 173,891.
Qualifying a Buyer for a Loan You have a buyer who has a total income of $6,200 per month, with monthly debts of $580. Assuming a 20% down payment at 7.5% annual interest for 30 years, a tax rate of 1.5%, an insurance rate of .5%, and an income/debt ratio of 28/36, what is the maximum sales price this buyer can consider? 1. Clear any previous TVM values. Press # -. 0.00 2. Enter income percent. Press 28 # m. IN% = 28.00 DB%= 36.00 TX%= 1.50 IS% = 0.50 TRM= 30.00 3. Enter debt percent.
10. Enter monthly debt amount. Press 580 j. DBT= 580.00 DN%= 11. Enter down payment percent and compute PITI. Press 20 j. DN%= 20.00 PITI= -1,652.00 PMT= -1,272.77 QLA= 182,028.97 QPR= 227,536.21 DN$ = 45,507.24 12. Compute loan payment. Press j. 13. Compute loan amount. Press j. 14. Compute sales price. Press j. 15. Compute down payment amount. Press j. The buyer should consider a maximum sales price of $227,536.21 and a maximum loan of $182,028.97.
Going Further The BA Real Estate calculator contains built-in financial formulas, or “models,” designed to solve common financial and real estate calculations. The remaining chapters in this book explain how to use the models. If you need to review general calculator operation, refer to the Appendix. Permanent and Temporary Models The calculator permanently stores some values you enter; others are retained only while you are using a particular model.
Chapter 1: Mortgages and Amortization This chapter describes real estate models relating to mortgages and amortization. Chapter Contents The Time-Value-of-Money (TVM) Model ........................... 16 Changing TVM Settings ....................................................... 17 Setting Default Rates for Your Area .................................. 18 Calculating Down Payments............................................... 19 Computing a Monthly Mortgage Payment.........................
The Time-Value-of-Money (TVM) Model The TVM model lets you solve problems involving regularly occurring, even payments, such as loans. When you enter TVM values and settings, they are kept in memory locations reserved specifically for them. Using the other financial models does not affect these values and settings. Cash Inflows (+) and Outflows (-) Entering TVM Values The formulas for the TVM and Amortization models distinguish between inflows (cash you receive) and outflows (cash you pay out).
Changing TVM Settings You can vary settings that affect TVM and Amortization calculations. These settings allow you to customize the calculation for the specific loan or savings situation you are evaluating. The calculator retains the settings until you change them (or until batteries are replaced). Selecting Beginning- or End-of-period Payments The # , key sequence lets you alternate between beginning-of-period and end-of-period payments.
Setting Default Rates for Your Area The calculator permanently stores the income/debt ratios and local tax and insurance rates you enter. These settings are used as defaults in your buyer-qualification and PITI calculations. Setting the Qualifying Ratios Be sure that you have entered the income/debt ratios before calculating any buyer qualifications. 1. Enter the income percent used by lenders in your area for the most commonly used mortgages.
Calculating Down Payments Mortgage loans are usually stated as 80% loans, 90% loans, etc. The down payment percentage is the difference between the stated percentage and 100%. The down payment percentage is applied to the sales price of the property to find the down payment amount. Calculating a Down Payment Amount If you know the sales price of a property and the down payment percentage, you can easily compute how much the down payment will be.
Computing a Monthly Mortgage Payment Find the monthly payment on a home priced at $130,000 if the buyer makes a 10% down payment and finances the balance with a 30-year mortgage at 9.125% annual interest. If you are preparing a report for a client, fill in the worksheet as you calculate the results. Solution Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Set P/Y and C/Y to 12. # + 12 j Display 0.00 P/Y = C/Y = 12.00 12.00 12.00 j Enter term in years.
Mortgage Payment—Principal and Interest 1. Clear TVM values (if not already cleared). #- $130,000 2. Enter sales price. 3. Subtract down payment. X 10 4. Calculate and enter loan amount. j $117,000 2 30 0 5. Enter term of loan (in years). 9.125 6. Enter interest rate. 7. Compute payment amount. $3 A 1 $.951.95 Mortgages and Amortization 21 BEAR-CH1.
Finding the Unpaid Balance on a Mortgage Consider a mortgage loan of $250,000 that is to terminate in 25 years. At 8.5% annual interest rate, what will the unpaid balance be in 15 years? Solution Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Set P/Y and C/Y to 12. # + 12 j Display 0.00 P/Y = C/Y = j Calculate original mortgage payment. 25 0 8.5 1 250 q 2 $3 12.00 12.00 12.00 TRM= 25.00 I% = 8.50 LN = 250,000.00 PMT= -2,013.
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 $250,000 4. Enter original loan amount. 5. Compute payment. $3 7. Compute unpaid balance. $.2,013.07 180 6. Enter number of payments made. $4 2 #* $.162,362.91 Mortgages and Amortization 23 BEAR-CH1.
Paying Off a Loan with Larger Payments A client has just borrowed $125,000 for 30 years at 7.75%. If she is able to increase her payment amount by $100 per month, how quickly can she pay the note off? Solution Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Set P/Y and C/Y to 12. # + 12 j Display 0.00 P/Y = C/Y = 12.00 12.00 12.00 30.00 j Enter term in years. 30 0 TRM= Enter interest rate. 7.75 1 I% = Enter loan amount. 125 q 2 LN = 125,000.
Paying Off a Loan Early by Making Larger Payments 1. Clear TVM values (if not already cleared). # - 30 2. Enter term of loan (in years). 3. Enter interest rate. 7.75 4. Enter loan amount. $125,000 5. Compute monthly payment. $3 6. Add extra payment amount (as a negative amount). a 7. Calculate and enter new, larger payment. j3 8. Compute new term. $0 0 1 2 $.895.52 $100 t $.995.52 21.56 Mortgages and Amortization 25 BEAR-CH1.
Calculating a Balloon Payment You are buying a $75,000 lake house. With a 10% down payment, the interest rate will be 9.25% amortized over a 30-year period. However, the loan will be due and payable at the end of 15 years. How much will the balloon payment be at the end of 15 years? Solution Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Set P/Y and C/Y to 12. # + 12 j Display 0.00 P/Y = C/Y = 12.00 12.00 12.00 TRM= I% = LN = 30.00 9.25 7,500.00 67,500.
Calculating a Balloon Payment to Retire a Mortgage 1. Clear TVM values (if not already cleared). #- 30 2. Enter term of loan (in years). 0 3. Enter interest rate. 9.25 4. Enter loan amount. $67,500 2 $.555.31 #n 3 5. Compute payment amount and round the result. $3 180 6. Enter the number of payments made. 7. Compute unpaid balance. 8. Add payment computed in line 5. 9. Calculate the balloon payment. $4 a]3 j 1 #* $.53,953.92 $.555.31 $.54,509.23 Mortgages and Amortization 27 BEAR-CH1.
Finding the Payment for a Mortgage with a Balloon You are making a $70,000 loan at 8% over 30 years, with a balloon payment of $20,000 due at the end of the loan. How much will your monthly payment be? Solution Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Enter term in years. 30 0 TRM= 30.00 Enter interest rate. 81 I% = 8.00 Enter loan amount. 70 q 2 LN = 70,000.00 FV = -20,000.00 Enter balloon amount 20 q t 4 as a negative. Compute payment.
Total Payment Including Taxes and Insurance (PITI) You can compute the total monthly payment including principal, interest, local property taxes, and insurance (PITI). Values Used to Calculate PITI The PITI calculation uses the selling price, the TVM values, and the values you have entered for the tax rate (# Z) and the insurance rate (# Q), or the actual annual tax and insurance amounts (# E).
Computing Total Payment (PITI) A couple is interested in a small lake-front property, for which the owner is asking $85,000. The buyers need to know the approximate amount of their total payment on the property. Background You know that the property taxes and insurance rates for the lake area average 2.38% and 0.78% respectively. The couple has $20,000 to use as a down payment.
PITI—Principal, Interest, Tax, and Insurance 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 #Q $85,000 @ 5. Enter term of loan (in years). 30 0 6. Enter interest rate. 9 7. Enter loan amount. $65,000 4. Enter price. 8. Compute payment (principal and interest). $3 $.523.00 9. Compute PITI. $& $.746.
Adjustable-Rate Mortgage (ARM) The ARM model lets you find the payment amount for each range of payments in an adjustable-rate mortgage. ARM Values To calculate information on an ARM, set up the mortgage terms in the TVM model, and then press M to start the ARM model. Name Meaning P1 = The first payment number in a range of payments (initial value=1). P2 = The ending payment number in the range. I% = The interest rate within the range P1 to P2. Initially, this is a copy of the TVM I% value.
Finding Periodic Payments for an ARM A bank is lending $100,000 on an adjustable rate, 30-year mortgage at 6% annual interest with an annual cap on the interest rate of 2% and a lifetime cap of 6%. Find the payment amount for each adjustment period assuming it accelerates by the maximum amount at each adjustment period. Solution Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Set P/Y and C/Y to 12. # + 12 j Display 0.00 P/Y = C/Y = j 12.00 12.00 12.
Finding Periodic Payments for an ARM (Continued) Solution (Continued) Steps Keystrokes Display Accept range for fourth year and show previous I%. j j P1 = P2 = I% = 37.00 48.00 10.00 I% = PMT= BAL= 12.00 -1,012.28 96,688.17 Increase I% to the cap 12 j for the loan, and j show PMT and BAL for fourth year. Exit ARM. ! 96,688.17 The payment for the remainder of the loan is $1,012.28. Note: The worksheet on the next page omits step 1, clearing the TVM values, due to page size restrictions.
Adjustable Rate Mortgage 12 j 12 j 3. Enter term of loan (in years). 30 0 4. Enter interest rate. 6 5. Enter loan amount. $100,000 2. Set number of payments per year and number of compounding periods per year (if not already set). #+ 1 2 M 6. Start ARM. 7. Accept the number of the initial payment (P1). 1 j 8. Enter the number of the ending payment (P2) for the first adjustment period. 12 j 6.00 j 9. Accept the initial interest rate. $.599.55 10.
Comparing an ARM to a Fixed-Rate Mortgage For a loan of $145,000, you are comparing a fixed-rate mortgage of 7.5% for 30 years to a 30-year ARM. The ARM has an initial rate of 5% with a 2% maximum adjustment for each 12-month period and a maximum lifetime adjustment of 6%. Find the breakeven point. Situation You are trying to help a buyer decide whether to use a fixed-rate mortgage or an adjustable-rate mortgage. You want to compare the fixed-rate term to the best one-year adjustable loan you have found.
ARM vs. FixedRate Mortgage Steps Keystrokes Display ] 3t Calculate monthly X 960.21 j savings/costs by subtracting amount of second period ARM payment from fixed-rate payment. 53.65 O 12 j Multiply monthly savings/costs by number of months in this ARM period. Add to stored savings/costs and store. a ] gj Tg 643.81 MEM= ] 3t Calculate monthly X 1153.34 j savings/costs by subtracting amount of third period ARM payment from fixed-rate payment -139.
Comparing an ARM to a Fixed-Rate Mortgage (Cont.) Adjustable Rate Mortgage vs. Fixed-Rate Mortgage 1. Use the Adjustable Rate Mortgage worksheet to calculate the payments for each adjustment period of the ARM and record those values in steps 4, 9, 15, and 21 respectively. 2. Use the Mortgage Payment—Principal and Interest worksheet to calculate the payment for the fixed-rate mortgage and record that value in steps 3, 8, 14, and 20. $.1,013.86 t 3. Enter amount of fixed-rate payment. 4.
14. Enter amount of fixed-rate payment. ]3 $.1,013.86 t 15. Subtract amount of ARM payment for third period. X $1,153.34 16. View monthly savings/costs during third period. j $.139.48 O 12 j $.1,673.75 18. Add to recorded savings/costs from step 13. a]g $3,469.46 19. Record accumulated savings/costs. jTg 17. Multiply monthly savings/costs by number of months in this adjustment period. 20. Enter amount of fixed-rate payment. ]3 $1,795.72 $.1,013.86 t 21.
Bi-Weekly Mortgage Payments You can find the effect of making bi-weekly payments (26 half-payments per year) instead of monthly payments. Values Used by the Model To calculate bi-weekly payments, set up the current mortgage in the TVM model and then press L. The calculator uses the TVM values to compute the results. Name Meaning PMT= The bi-weekly payment required. N = The total number of bi-weekly payments required. YRS= The number of years required to retire the loan.
Benefits of Bi-weekly Payments Making bi-weekly payments instead of monthly payments allows you to pay off a loan more quickly and thus reduce the amount of 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 mortgage payment would be $843.83.
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 Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Set P/Y and C/Y to 12. # + 12 j Display 0.00 P/Y = C/Y = j Enter the loan values. 30 0 81 115 q 2 Show bi-weekly payment amount, number of payments, years to pay off the loan, and interest saved.
Bi-Weekly Mortgage Payments 1. Clear TVM values (if not already cleared). # 2. Enter term of loan (in years). 30 3. Enter interest rate. 8 4. Enter loan amount. $115,000 5. Start Bi-Weekly and view the bi-weekly payment amount. L 1 2 $.421.91 6. View the number of bi-weekly payments (N) required to pay off loan. j 590.84 7. View the number of years (YRS) required. j 22.66 j $54,498.00 8.
Finding the Balance on a Canadian Loan A client is moving to Canada and will be living there for five years. She will purchase a home while she is there and will sell it when she returns to the U.S. She is looking at a $185,000 home at 8¼% for 30 years. She has $17,000 to put down. Find her mortgage payment and her remaining balance after the five-year period. Solution Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Set payment periods.
Payment and Remaining Balance on a Canadian 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 8.25 5. Enter interest rate. 8. Enter number of payments made, and store as N. 9. Compute balance at end of period. 1 $168,000.00 2 6. Enter loan amount. 7. Compute payment amount. 0 $3 5 O 12 j $4 $.1,245.83 60 #* $.159,879.
Amortization (AMORT) You can calculate the principal and interest paid in a range of payments and the loan balance after the last payment in the range. The calculator prompts you for the starting and ending payment numbers and uses the TVM values to calculate the results. Amortization Values To calculate amortization, first enter the TVM values for the loan and then press %. You can exit the Amortization model at any time by pressing !. Name Meaning P1 = Prompt for first payment in the range.
Finding the Principal and Interest Paid You are buying a home with a 30-year, $105,000 mortgage with an annual interest rate of 9.125%. Assume that the first payment is due in May. Find the principal and interest you will pay on the loan during the first three tax years. Solution: First Tax Year The first tax year (May through December) includes payments 1 through 8. Steps Keystrokes Clear TVM Values. #- Set P/Y and C/Y to 12. # + 12 j j Display 0.00 P/Y = C/Y = 12.00 12.00 12.
Finding the Principal and Interest Paid (Continued) Solution: Second Tax Year The second tax year (January through December) includes payments 9 through 20 (12 payments). Steps Keystrokes Display Accept updated P1, and advance to P2. jj P1 = P2 = 9.00 16.00 Enter new P2.* 20 P2 20.00 Display balance, principal, and interest for the second year. j P2 = 20.00 BAL= 103,798.03 -742.90 PRN= -9,508.82 INT= j j *The calculator updates P1 to 9.00 and P2 to 16.
30 2. Enter term of loan (in years). 3. Enter interest rate. 9.125 4. Enter loan amount. $105,000 5. Compute payment (principal and interest). $3 0 1 2 $.854.31 % 6. Start Amortization. 7. Accept initial payment period (P1), or enter the number of the beginning payment period. 1 j 8. Accept ending payment period (P2), or enter the number of the ending payment period. 8 j $104,540.93 9. View balance remaining after P2. 10. View principal paid from P1 through P2. j $.459.07 11.
50 Mortgages and Amortization BEAR-CH1.
Chapter 2: Buyer Qualification This chapter describes real estate models relating to qualifying the buyer for a mortgage loan. Chapter Contents Buyer Qualification: Maximum Loan Amount .................. 52 Buyer Qualification: Minimum Income Required............. 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 ....
Buyer Qualification: Maximum Loan Amount You can calculate buyer qualification in one of two ways: by determining the maximum amount the buyer can afford to borrow, or by calculating the minimum income a buyer must have. This page describes the model based on loan amount, while the following page discusses the model based on minimum required income.
Buyer Qualification: Minimum Income Required The Qualifying Income model lets you calculate the minimum income a buyer must have to qualify for a given sales price.
Finding the Qualifying Loan Amount In this example, you know the tax, insurance, and down payment percentages. Situation You are helping a couple find a home. They have a combined monthly income of $6,500, with one car payment of $320 and other monthly debts of $175. Assuming an 80% loan at 8% annual interest for 30 years, a tax rate of 1.5%, an insurance rate of .5%, and using 28/36 qualifying ratios, estimate the maximum loan amount and sales price this couple should consider.
Finding Qualifying Loan Amount Based on Tax, Insurance, and Down Payment Percents 1. Clear TVM values (if not already cleared). #- 2. Enter income percent (if not already entered). 28 #m 3. Enter debt percent (if not already entered). 36 #d 4. Enter tax percent (if not already 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 $6,500 j $495 j 8. Start the qualification. ? 9.
Finding the Minimum Income Required A couple is interested in a home you are showing. The asking price is $250,000. Last year’s taxes were $3,750 and insurance was $1,250. The couple’s monthly debt is $635 and they are able to make a $50,000 down payment. If they get a 30-year loan at 8%, determine if their combined monthly income of $7,100 is enough for them to qualify. Solution Steps Keystrokes Clear TVM values. #- Enter income percent. 28 # m Display 0.00 IN% = 28.00 36.00 Enter debt percent.
Finding Qualifying Income Based on Tax, Insurance, and Down Payment Amounts 1. Clear TVM values (if not already cleared). #- 2. Enter income percent (if not already entered). 28 #m 3. Enter debt percent (if not already entered). 36 #d 4. Enter annual tax amount. 5. Add annual insurance amount, and enter total. $3,750 a $1,250 j#E 0 6. Enter term of loan (in years). 30 7. Enter interest rate. 8 1 $250,000 j 10. Enter down payment amount. $50,000 j 11.
Finding the Maximum Allowable Debt Assuming a sales price of $125,000, 10% down payment, 8% annual fixed rate, 30-year term, and an income/debt ratio of 28/36, determine the maximum debt a buyer can have and still qualify for the loan. Also assume that the annual tax rate is 1.5% and the annual insurance rate is 0.5% Solution Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Enter income percent. 28 # m Display 0.00 IN% = 28.00 Enter debt percent.
Finding Maximum Allowable Debt 1. Enter income percent (if not already entered). 28 #m 2. Enter debt percent (if not already entered). 36 # d 3. Enter tax percent (if not already entered). 1.5 #Z 4. Enter insurance percent (if not already entered). .5 #Q 5. Enter term of loan (in years). 30 0 6. Enter interest rate. 8 1 $125,000 j 10 j > 7. Start the qualification. 8. Enter price. 9. Enter down payment percent (0 to 99). 10. Enter a zero for monthly debt amount (total). 0 11.
Finding the Net Cost of Housing A couple is considering an $84,000 mortgage to purchase a $105,000 home. What would their net cost of housing be if they were in the 28% tax bracket? Use a standard 30-year note and 8% interest for your example. Assume property tax and insurance rates are 1.5 and .35 respectively. Solution Press # , until the BGN indicator disappears. Steps Keystrokes Display Clear TVM values. #- Enter sales price. 105 q @ PRC= 105,000.00 Enter tax percent. 1.5 # Z TX%= 1.
Net Cost of Housing Based on Tax and Insurance Percents 1. Clear TVM values (if not already cleared). #- 2. Enter sales price. $105,000 @ 3. Enter tax percent (if not already entered). 1.5 #Z 4. Enter insurance percent (if not already entered). .35 #Q 5. Enter term of loan (in years). 30 0 6. Enter interest rate. 8 7. Enter loan amount. $84,000 8. Compute payment. $3 $.616.36 9. Recall loan amount. ]2 $84,000.00 10.
62 Buyer Qualification
Chapter 3: Other Financial Tools This chapter describes various real estate and financial models that illustrate the varied capability of the BA Real Estate calculator. Chapter Contents Finding the Future Value of a Lump Sum...........................64 Saving for the Future with Regular Deposits.....................66 Percent Change and Appreciation Model...........................69 Calculating Percent Change and Appreciation..................70 Interest Conversion Model.................................
Finding the Future Value of a Lump Sum When you entered the real estate business, you took a $50,000 lump-sum distribution from your retirement program. You want to roll it over into an IRA that yields 7% compounded monthly. What will the account’s value be in 20 years when you reach age 65? Solution Steps Keystrokes Clear TVM values. #- Display 0.00 Set monthly compounding periods. # + 12 j j C/Y = 12.00 12.00 Enter term of account (in years). 20 0 TRM= 20.00 Enter interest rate of account.
Savings Account with One Deposit 1. Clear TVM values (if not already cleared). #- 12 jj 3. Enter term of account (in years). 20 0 4. Enter interest rate of account. 7 2. Enter number of compounding periods per year. #+ $50,000 5. Enter initial deposit in account. 6. Compute value of account at maturity. $4 1 t2 $201,936.94 Other Financial Tools 65 BEAR-CH3.
Saving for the Future with Regular Deposits You wish to invest $200 at the beginning of each month in a retirement plan that earns an annual interest of 7.5% compounded monthly. What will the account balance (FV) be at the end of 20 years if compounded monthly? If compounded quarterly? Example 1: Compounded Monthly Steps Keystrokes Display Clear TVM values. #- Set beginning-ofperiod payments. #, BGN Set 12 payments per year. # + 12 j BGN 0.00 0.00 P/Y = 12.
Savings Account with Regular Deposits 1. Clear TVM values (if not already cleared). 2. Set beginning- or end-of-period payments.* #- # , (as necessary) 12 j 4. Enter number of compounding periods per year. 12 j 5. Enter term of account. 20 0 6. Enter interest rate of account. 7.5 1 3. Enter number of deposit periods per year. #+ 0 7. Enter initial deposit in account. $200 8. Enter subsequent regular deposits. 9. Compute value of account at maturity. $4 2 t3 $111,438.
Saving for the Future with Regular Deposits (Continued) Example 2: Compounded Quarterly What would the final amount be if the interest were compounded quarterly? Steps Keystrokes Set 12 payments per year. # + 12 j Display BGN P/Y = 12.00 BGN C/Y = Set 4 compounding periods per year. 4j 12.00 BGN 4.00 Calculate future value $ 4 of the account. Clear display and restore to end-ofperiod payments.* ! #, Restore C/Y to 12 per year. # + j12 j BGN FV = 110,801.04 0.00 C/Y = 12.
Percent Change and Appreciation Model A single model calculates both percent change and rate of appreciation (compound growth). You can enter any three of the model's values and compute the fourth. Values Used by the Model Key Sequence Function #7 Enters the starting value. #8 Enters the ending value. #9 Enters the number of compounding periods during the change from V1 to V2. #: Enters the percent change from V1 to V2 (when #PD=1), or the rate of appreciation per period (when #PD > 1).
Calculating Percent Change and Appreciation Follow these examples to become familiar with the Percent Change and Appreciation model. Example of Percent Change Calculate the percent change from 125 to 135. Steps Keystrokes Display Enter starting value. 125 # 7 V1 = 125.00 Enter ending value. 135 # 8 V2 = 135.00 Enter number of periods. 1 #9 #PD = 1.00 Calculate % change. $#: APP= 8.
Appreciation Total Percent Change/Appreciation Rate 1. Enter starting value or price. 125 #7 2. Enter ending value or price. 135 #8 1 #9 3. Enter number of periods as 1. 4. Compute appreciation rate. $#: 8.00% . . . Estimate of Appreciated Value $70,000 1. Enter starting value or price. #7 2. Enter total number of periods over which appreciation will occur. 10 #9 3. Enter expected appreciation rate per period. 2 # : 4. Compute expected ending value or price. $#8 $85,329.
Interest Conversion Model This model lets you convert between nominal (NOM) interest rates (the compound interest rates for the period) and annual effective (EFF) interest rates (the rates at which you actually earn or pay). Values Used by the Model Key Sequence Function #F Enters the nominal interest rate (APR). #G Enters the annual effective interest rate. #H Enters the number of compounding periods per year. Note: PDS/YR is always an entered value. Attempting to compute PDS/YR causes an error.
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 Effective 1. Enter nominal rate. 15 #F 2. Enter number of compounding periods per year. 4 # H 3. Compute effective rate. $#G 15.87% Other Financial Tools 73 BEAR-CH3.
Annual Percentage Rate (APR) You can compute the true APR of a transaction, taking into account the points and fees charged. APR Values To calculate APR, first enter the term and loan amount in the TVM model. Then press N to start the model, and enter the appropriate values when prompted. You can exit the APR model at any time by pressing ! . Name Meaning I% = The annual (nominal) interest rate of the loan. PTS= The number of points charged. FEE= The total fees (such as refinancing fees) charged.
Annual Percentage Rate Considering Points and Fees 1. Clear TVM values (if not already cleared). #- 2. Enter term of loan (in years). 3. Enter loan amount. 4. Start APR. 30 0 $125,000 2 N 5. Enter interest rate. 8 j 6. Enter number of points. 2 j $2,000 7. Enter total fees. 8. View actual annual percentage rate. j 8.39% Other Financial Tools 75 BEAR-CH3.
Finding the APR of a Refinanced Loan Five years ago, you purchased a home with a 30-year, $104,000 mortgage loan at 12% annual interest. You can now refinance the loan balance at 8.5% annual interest, provided you pay 2 points plus a $500 fee. What is the new monthly payment and the APR of the new loan? Solution Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Set P/Y and C/Y to 12. # + 12 j Display 0.00 P/Y= C/Y= j 12.00 12.00 12.
Monthly Payment and APR of a Refinanced Loan 1. Clear TVM values (if not already cleared). #- 2. Enter original term of loan (in years). 30 0 3. Enter interest rate. 12 1 $104,000 4. Enter face value of mortgage loan. 5. Compute payment amount. $3 7. Compute balance of original loan, and store as amount of refinanced loan. 8. Set FV to zero. $4 10. Enter new interest rate. 12. Start APR. 13. Enter number of points. 14. Enter total fees. 15. View actual annual percentage rate. 0 $-101,569.
Pricing a Note to Meet a Required Yield You sold a house where the seller carried back a $25,000 second lien at 8% for ten years. After 36 payments, the seller contacts you to see if he can sell his note. You explain that you know an investor who might be interested, but requires a yield of 12% on investments. Background In a situation like this, the investor is buying the right to collect the stream of payments for the remaining term of the loan.
Finding the Purchase Price of a Note to Meet a Required Yield 1. Clear TVM values (if not already cleared). #- 2. Enter term of original note (in years). 10 3. Enter interest rate of original note. 8 $25,000 4. Enter amount of original note. 5. Compute original payment. $3 6. Recall total number of payments in original note, and store in memory. ] #* 7. Enter number of payments already made. 8. Compute current unpaid balance. 9. Recall original number of payments. 10.
Calculating the Yield of a Discounted Mortgage A person is holding a mortgage for $200,000 at 8% fixedrate interest for 30 years. She has carried the note for three years and has offered it to you. If she accepts your offer of $180,000 for the note, what will be your yield? Solution Press # , until the BGN indicator disappears. Steps Keystrokes Clear TVM values. #- Set P/Y and C/Y to 12. # + 12 j Display 0.00 P/Y = C/Y = 12.00 12.00 12.00 j Enter original term. 30 0 TRM= 30.
Yield of a Discounted Mortgage 1. Clear TVM values (if not already cleared). #- 2. Enter original term of loan (in years). 30 3. Enter interest rate. 8 $200,000 4. Enter face value of mortgage loan. 5. Compute payment amount. $3 7. Enter number of payments already made and store in memory. 3 O 12 j Tg 36 8. Calculate number of payments remaining, and store as N. ] #* X]gj 324 9. Compute annual yield for remaining term. $1 1 2 $.1,467.53 $180,000 6. Enter discounted purchase price.
Finding the Net Selling Price after Commission You have agreed to list a client’s house. The client states that he must net at least $125,000 after the sale. You determine that this is a fair amount after evaluating the property.
Appendix This appendix contains information about basic functions of the calculator, where to call if service is required, and the one-year limited warranty. Appendix Contents Effects of Turning the Calculator On and Off....................84 The Display and Indicators ..................................................85 Setting the Fixed-Decimal Format ......................................86 Entering Numbers and Clearing the Calculator ................87 Calculations ....................................
Effects of Turning the Calculator On and Off If you do not press any key for several minutes, the APD TM Automatic Power Down feature turns the calculator off to conserve the batteries. Effects Key Function ! When the calculator is off: • If you turned it off manually, ! turns it on and shows zero in the current fixed-decimal setting. • If the APD TM Automatic Power Down feature turned the calculator off, ! turns it on and shows the lastdisplayed information.
The Display and Indicators The calculator display shows a maximum of 10 digits. It also shows the labels of model values. When necessary, it automatically shows numbers in scientific notation with a 7-digit mantissa and a 2-digit exponent. Display 2nd FIX CPT SAV= M BGN 20,000.00 Note: SAV= is typical of labels that identify displayed values. In this example, the interest saved by bi-weekly payments is $20,000. Indicators Indicator Meaning 2nd You have pressed the # key.
Setting the Fixed-Decimal Format Although the calculator can display numbers with as many as 10 digits, you can set the number of displayed decimal places. The factory setting is two decimal places. Setting the Format Key Sequence Function #on (Where n = 0 through 9) Sets the number of decimal places displayed in results and turns on the FIX indicator. #os • If a number has more than n decimal places, it is rounded in the displayed result.
Entering Numbers and Clearing the Calculator You can enter up to 10 digits in a number; the calculator ignores any extra digits. Commas are inserted automatically in numbers to make them easier to read. Entering and Clearing Numbers Key Function q The q key makes it easy to enter numbers that are multiples of 1,000. To enter 120,000, for example, press 120 q. f The f (backspace) key lets you correct a numeric entry by erasing one digit at a time from the end of the entry.
Calculations The BA Real Estate calculator evaluates expressions immediately for some functions. Other functions are evaluated in the order they are entered. Immediate Functions The A, K, and # ; keys perform their functions immediately on the displayed number. For example, pressing 25 O 10 K displays the square of 10, not the square of 25 times 10. For the square of 25 times 10, press 25 O 10 j K.
Basic Arithmetic All basic arithmetic calculations are completed in the order in which you enter them. For example, 2 + 5 x 4 = 28. Basic Arithmetic Functions Key Sequence Function a, X, O, B Perform addition, subtraction, multiplication, and division. Example: 12 O 5 a 60 B 3 j t 40.00 Changes the sign (positive 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 K 4.00 Squares the number in the display.
Percent Calculations You can calculate percentages, ratios, add-ons, and discounts. Percent Functions Operation Function Percentage: nOpAj Finds p% of the displayed number n (or the displayed result after O is pressed). Example: 250 O 5 A j Ratio: nBpAj 0.05 12.50 Calculates the number of which n (or the displayed result after B is pressed) is p%. Example: 250 B 5 A j Add-On: napAj 0.05 5,000.
Rounding Results The BA Real Estate calculator can round numbers to the fixed-decimal setting. This is useful for some financial calculations such as computing balloon payments. Effect of Rounding The # o key sequence (see page 86) lets you control the displayed form of results without affecting the value stored internally. However, # n rounds the internal, 13-digit form of a displayed result to match the displayed form. Keystrokes #os Display Internal Form 0. 0.000000000000 2 #; 1.414213562 1.
Using Memory You can store numbers, such as results of calculations, in the user memory or in the financial models. The calculator retains the values stored in memory until you change them (or until batteries are replaced). Storing and Recalling Values The calculator has one user memory. To specify the user memory, you must press T g (to store) or ] g (to recall). Example: 28 T g MEM= M 28.00 The M indicator is turned on when the user memory contains a nonzero value.
Battery Information The BA Real Estate calculator cannot hold data in memory when the batteries are removed or become discharged. Type of Battery to Use Replacing the Batteries The calculator uses two of any of the following batteries. • For up to 1000 hours of operation, use Panasonic LR-44, Ray-O-Vac RW-82, Union Carbide (Eveready) A-76, or equivalent battery types.
Support and Service Information Product Support Customers in the U.S., Canada, Puerto Rico, and the Virgin Islands For general questions, contact Texas Instruments Customer Support: phone: e-mail: 1.800.TI.CARES (1.800.842.2737) ti-cares@ti.com For technical questions, call the Programming Assistance Group of Customer Support: phone: 1.972.917.8324 Customers 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.
Warranty Information Customers in the U.S. and Canada Only One-Year Limited Warranty for Electronic Product This Texas Instruments (“TI”) electronic product warranty extends only to the original purchaser and user of the product. Warranty Duration. This TI electronic product is warranted to the original purchaser for a period of one (1) year from the original purchase date. Warranty Coverage. This TI electronic product is warranted against defective materials and construction.
