4235.1 REV-1 Appendix 21 ___________________________________________________________________________ HOME EQUITY CONVERSION MORTGAGE Using an HP12C to Calculate Payments to Borrowers This appendix illustrates use of an HP12C for calculating payments to borrowers under the Home Equity Conversion Mortgage Insurance program. For simplicity, the examples assume a 75 year old borrower in a $100,000 house with either a 10 percent interest rate and no servicing fee or a 9.5 percent interest rate and a $12 servicing fee. Screen You Enter Displays Determining the Principal Limit _______________ Clear register. Enter principal limit factor from table in Appendix 16 for 75 year old borrower and 10 percent interest rate. Multiply by maximum claim amount. Calculating Tenure Payments Clear register. Set calculator for payments at beginning of period. Enter principal limit. Subtract initial payments--e.g., $2,000 mortgage insurance premium (MIP) and 41,600 3,500 [f] [REG] [g] [BEG] 0.000 0.000 .416 ________ _________ Keystrokes _______________
[f] [REG] [ENTER]
0.000 .416
100,000
[x]
41,600.000
[ENTER] [-]
41,600.000 38,100.000
___________________________________________________________________________ Page 1 of 12 4235.1 REV-1 Appendix 21
___________________________________________________________________________ $1,500 closing costs.
Enter net principal limit. Enter expected rate. Add periodic MIP to calculate compounding rate. Enter monthly compounding rate. Calculate years until borrower turns 100. Subtract age of youngest borrower rounded to nearest whole year. Enter term in months. Calculate future value of principal limit. Prepare to calculate monthly payments. Calculate monthly tenure payment. Calculating Term Payments Clear register. Set calculator for payments at beginning of period. 0 100 75 10 .5
[PV] [ENTER] [+]
38,100.000 10.000 10.500
[g] [i] [ENTER] [-]
.875 100.000 25.000
[g] [n] [FV]
300.000 -519,983.179
[PV] [PMT]
0.000 356.613
[f] [REG] [g] [BEG]
0.000 0.000
___________________________________________________________________________ Page 2 of 12 Appendix 21 4235.1 REV-1
___________________________________________________________________________ Enter principal limit. Subtract initial payment --e.g., $2,000 mortgage insurance premium (MIP) and $1,500 closing costs. 41,600 3,500 [ENTER] [-] 41,600.000 38,100.000
Enter net principal limit. Enter monthly compounding rate. Enter term (10 years). Calculate future value of principal limit. Prepare to calculate monthly payments. Calculate monthly term payment. Calculating Tenure Payment With Monthly Servicing Charge Set-Aside Clear register. Set calculator for payments at beginning of period. Enter monthly servicing charge. 12 0 10.5 10
[PV] [g] [i] [g] [n] [FV]
38,100.000 .875 120.000 -108,380.389
[PV] [PMT]
0.000 509.643
[f] [REG] [g] [BEG]
0.000 0.000
[PMT]
12.000
Enter compounding 10 [g] [i] .833 rate (9.5% + .5%). ___________________________________________________________________________ Page 3 of 12 4235.1 REV-1 Appendix 21
___________________________________________________________________________ Enter term (100 - 75). Calculate servicing fee set-aside. Add principal limit. (.443 x 100,000) Subtract initial payments ($2,000 +$1,500). Enter net principal 44,300 3,500 25 [g] [n] [PV] 300.000 -1,331.571
[+] [-]
42,968.429 39,468.429
[PV]
39,468.429
limit. Prepare to calculate monthly payments. Calculate future value of principal limit. Prepare to calculate monthly payments. Calculate monthly tenure payment. Calculating Term Payment With Initial Draw and Line of Credit Set-Aside Clear register. Set calculator for payments at beginning of period. [f] [REG] [g] [BEG] 0.000 0.000 0 0 [PMT] [FV] 0.000 -475,868.673
[PV] [PMT]
0.000 355.686
Enter principal limit. 41,600 [ENTER] 41,600.000 ___________________________________________________________________________ Page 4 of 12 Appendix 21 4235.1 REV-1
___________________________________________________________________________ Subtract initial payment --e.g., $2,000 mortgage insurance premium (MIP) and $1,500 closing costs. Subtract initial draw. Subtract line of credit set-aside. Enter net principal limit. Enter monthly compounding rate. Enter term (10 years). Calculate future value of principal limit. 10.5 10 3,500 [-] 38,100.000
5,000 2,000
[-] [-] [PV] [g] [i] [g] [n] [FV]
33,100.000 31,100.000 31,100.000 .875 120.000 -88,467.981
Prepare to calculate monthly payments. Calculate monthly term payment. Change in Payment Plan After 60 Months From Line of Credit to 7-Year Term (Assumes $5,000 Initial Draw and Financing of Closing Costs)
0
[PV] [PMT]
0.000 416.008
___________________________________________________________________________ Page 5 of 12 4235.1 REV-1 Appendix 21
___________________________________________________________________________ Clear register. Set calculator for payments at beginning of period. Enter principal limit. Subtract initial payment --e.g., $2,000 mortgage insurance premium (MIP) and $1,500 closing costs. Subtract initial draw. Enter net principal limits. Enter monthly compounding rate. Enter lapsed months. Calculate future value of principal limit. Prepare to calculate net principal limit. Enter initial mortgage balance (3,500 + 5,000). Calculate current mortgage balance. 8,500 10.5 60 41,600 3,500 [f] [REG] [g] [BEG] 0.000 0.000
[ENTER] [-]
41,600.000 38,100.000
5,000
[-] [PV] [g] [i] [n] [FV]
33,100.000 33,100.000 .875 60.000 -55,826.559
[CHS] [PV] [FV]
55,826.559 8,500.000 -14,336.125
Calculate net principal limit.
[+]
41,490.433
___________________________________________________________________________ Page 6 of 12 Appendix 21 4235.1 REV-1
___________________________________________________________________________ Enter net principal limit. Enter term (7 years). Calculate future value of principal limit. Prepare to calculate monthly payments. Calculate monthly term payment. Change in Payment Plan After 36 Months From Tenure to 8-Year Term Clear register. Set calculator for payments at beginning of period. Enter principal limit. Subtract initial payment --e.g., $2,000 mortgage insurance premium (MIP) and $1,500 closing costs. Enter net principal limit. Enter monthly compounding rate. Enter initial term. 10.5 25 41,600 3,500 [f] [REG] [g] [BEG] 0.000 0.000 0 7 [PV] [g] [n] [FV] 41,490.433 84.000 -86,251.365
[PV] [PMT]
0.000 693.489
[ENTER] [-]
41,600.000 38,100.000
[PV] [g] [i] [g] [n]
33,100.000 .875 300.000
___________________________________________________________________________ Page 7 of 12
4235.1 REV-1
Appendix 21
___________________________________________________________________________ Calculate future value of principal limit. Prepare to calculate monthly payments. Calculate monthly tenure payment. Prepare to calculate mortgage balance: Enter initial payments ($2,000 + $1,500). Enter lapsed months. Calculate current mortgage balance. Prepare to calculate principal limit. Enter initial principal limit. Calculate current principal limit. Prepare to calculate net principal limit. Calculate net principal limit. Enter net principal limit. Enter term (8 years). Calculate future value of principal limit. 8 0 41,600 3,500 0 [FV] -519,983.179
[PV] [PMT] [PV]
0.000 356.613 3,500.000
36
[n] [FV] [PMT] [PV] [FV] [CHS] [+] [PV] [g] [n] [FV]
36.000 -19,934.451 0.000 41,600.000 -56,924.739 56,924.739 36,990.288 36,990.288 96.000 -85,370.593
___________________________________________________________________________ Page 8 of 12 Appendix 21 4235.1 REV-1
___________________________________________________________________________ Prepare to calculate 0 [PV] 0.000
monthly payment. Calculate monthly term payment. Change in Payment Plan After 48 Months From 10-Year Term with Service Fee to 14-Year Term Clear register. Set calculator for payments at beginning of period. Enter monthly servicing charge. Enter compounding rate (9.5% + .5%). Enter term (100 - 75). Calculate servicing fee set-aside. Add principal limit. (.443 x 100,000) Subtract initial payments ($2,000 + $1,500). 44,300 3,500 12 10 25 [f] [REG] [g] [BEG] 0.000 0.000 [PMT] 566.177
[PMT] [g] [i] [g] [n] [PV]
12.000 .833 300.000 -1,331.571
[+] [-]
42,968.429 39,468.429
Enter net principal [PV] 39,468.429 limit. ___________________________________________________________________________ Page 9 of 12 4235.1 REV-1 Appendix 21
___________________________________________________________________________ Prepare to calculate monthly payments. Enter initial term. Calculate future value of principal limit. 10 [PMT] [g][n] [FV] 0.000 120.000 -106,842.674
Prepare to calculate monthly payments. Calculate monthly term payment. Add monthly service fee. Enter total monthly payment. Enter initial payments ($2,000 + $1,500). Enter lapsed months. Calculate current mortgage balance. Enter initial principal limit. Prepare to calculate current principal limit. Calculate current principal limit. Prepare to calculate net principal limit. Calculate net principal limit.
0
[PV] [PMT]
0.000 517.268 529.268 529.268 3,500.000
12
[+] [PMT]
3,500
[PV]
48
[n] [FV]
48.000 -36,551.653 44,300.000 0.000
44,300 0
[PV] [PMT]
[FV] [CHS] [+]
-65,978.387 65,978.387 29,426.734
___________________________________________________________________________ Page 10 of 12 Appendix 21 4235.1 REV-1
___________________________________________________________________________ Store net principal limit. Clear entries. Recalculate servicing set-aside. Enter compounding rate. Enter original term 12 10 300 [STO] [1] [g] [FIN] [PMT] [g] [i] [ENTER] 29,426.734 0.000 12.000 .833 300.000
of set-aside. Subtract lapsed months. Enter new term of set-aside. Calculate servicing set-aside. Recall net principal limit. Add net principal limit. Enter net principal limit. Prepare to calculate monthly payment. Enter new term. Calculate future value of principal limit. Prepare to calculate monthly payment. 0 0 14 48 [-] [n] [PV] [RCL] [1] [+] [PV] [PMT] [g] [n] [FV] 252.000 252.000 -1,272.639 29,426.734 28,154.095 28,154.095 0.000 168.000 -113,510.085
[PV]
0.000
___________________________________________________________________________ Page 11 of 12 4235.1 REV-1 Appendix 21
___________________________________________________________________________ Calculate monthly payment. [PMT] 309.426
___________________________________________________________________________ Page 12 of 12