Section 12: Real Estate and Lending 127
Example 2: Using the same information given in example 1, calculate the
annual yield if the loan is to be paid in full at the end of the fifth year (from
original issuance). (In this case both the payment amount and the balloon must
be calculated since they are not given.)
Calculate the remaining balance of the loan after five years.
The Rent or Buy Decision
The question of whether to rent or purchase a residence is not always easy to
answer, especially when the time period over which you would own or rent a
house is short. This program (written in RPN mode) performs an analysis which
could be helpful in reaching a decision. Essentially, it calculates a yield or rate of
return on the proposed investment. This yield may be compared with the yield
obtained by renting a residence and investing the down payment and monthly
payment differences in a savings account or other investment opportunity. This
program takes into account the tax advantages obtained by a home owner on
property taxes and mortgage interest.
First the program computes the Net Cash Proceeds upon Resale (NCPR),
4
next
the yield on the investment in the house and then the value of the hypothetical
savings account at the end of the investment period. A comparison of the NCPR
and the final balance of the savings account and a comparison of the yields
should aid in determining whether to rent or buy.
Keystrokes (RPN mode) Display
gÂ
fCLEARG
21gA
252.00
Input the number of periods (into n).
9gC
0.75
Monthly interest rate (into PV).
100000Þ$
–100,000.00
Mortgage amount (into PV).
P
884.58
Payment (calculated).
5gA
60
Number of periods to be amortized.
M
89,849.34
Remaining balance of the loan after
five years.
:n
60.00
42-n
18.00
New life of loan.
79000Þ$¼
1.77
Percent monthly yield. (calculated).
12§
21.29
Percent annual yield.
4.
The Net Cash Proceeds upon Resale (NCPR = sales price – commission – mortgage
balance), is the pre-tax proceeds. The program assumes that the buyer reinvests in like
property and is not subject to capital gains tax.
To Next Page
Loading...
Need help?
General
Weight and Dimensions
