BBS: Inland Empire Archive Date: 07-11-92 (16:02) Number: 287 From: DON KROUSE Refer#: NONE To: RICHARD ATTENBOROUGH Recvd: NO Subj: Amortization Formuli Conf: (2) Quik_Bas

PL> RA> basis. Maybe I am just missaplying the equation. It seems to tell me PL> RA> that if I go from monthly payments to biweekly payments that I end up PL> RA> paying the same amount of money! (wierd) Here is the equation that I PL> RA> have. Hi Richard, I missed your original post, but saw part of your message that someone else quoted. I've been a loan officer for many years, and have written quite a few applications that involve "Time Value of Money" calculations, so mabey I can help. The problem is not in the use of the formula, it's in an incorrect assumption of what a BiWeekly mortgage is. A BiWeekly mortgage is simply a monthly mortgage in which you pay half of the monthly payment amount every two weeks. This amounts to the eqiuvalent of 13 monthly payments per year instead of 12. There is only a small effect from increasing the number of Payment/Interest periods. The big effect is from accelerated principal reduction. The excess payments reduce the principal balance which therefore reduces the interest due for the next period which means that even more of the next payment goes to reduce principal......... The end effect is that a 30 year loan will pay off in "about" 20 years. It varies a little depending on the interest rate. You pay about 1/12 more per year, but you pay for about a third less years. Below is a small pgm that illustrates the principle. It is not well commented, to save space, so if it's not clear just ask. The _ at the end of some lines means that it is continued on the next line. MAKE SURE YOUAPPENDTHEM! - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Calc:CLSINPUT"Annual Interest Rate "; I#INPUT"Loan Amount "; PV# PPY% = 12 FV# = 0 N# = 360'---- Calc Adjusted rateMonthI# = I# / 1200 BiWeekI# = I# / 2600 WeekI# = I# / 5200'---- Calc payment amountMonthPmt# = -PV# / ((1 - (1 + MonthI#) ^ -N#) / MonthI#) BiWeekPmt# = MonthPmt# / 2 WeekPmt# = MonthPmt# / 4'---- Calc no. of patments necessary to amortizeMonthN# = -(LOG(1 - ((MonthI# * PV#) / -MonthPmt#)) / LOG(1 + MonthI#)) +- (LOG(1 - ((MonthI# * -FV#) / -MonthPmt#)) / LOG(1 + MonthI#)) BiWeekN# = -(LOG(1 - ((BiWeekI# * PV#) / -BiWeekPmt#)) / LOG(1 + BiWeekI#)_ ) + (LOG(1 - ((BiWeekI# * -FV#) / -BiWeekPmt#)) / LOG(1 + BiWeekI#)) WeekN# = -(LOG(1 - ((WeekI# * PV#) / -WeekPmt#)) / LOG(1 + WeekI#)) + (LOG_ (1 - ((WeekI# * -FV#) / -WeekPmt#)) / LOG(1 + WeekI#))'---- Convert the no. of payments to yearsMonthYrs# = MonthN# / 12 BiWeekYrs# = BiWeekN# / 26 WeekYrs# = WeekN# / 52'---- Calc the total amount paidTotalMonthPaid# = MonthN# * MonthPmt# TotalBiWeekPaid# = BiWeekN# * BiWeekPmt# TotalWeekPaid# = WeekN# * WeekPmt#'---- Calc the total interest paidMonthInterestPaid# = TotalMonthPaid# + PV# BiWeekInterestPaid# = TotalBiWeekPaid# + PV# WeekInterestPaid# = TotalWeekPaid# + PV#'---- Print to screenUSING"Payment #####,.## #####,.## #####,_ .##"; MonthPmt#; BiWeekPmt#; WeekPmt#USING"No. payments ####, ####, ####,"_ ; MonthN#; BiWeekN#; WeekN#USING"Number of years ####,.## ####,.## ####,._ ##"; MonthYrs#; BiWeekYrs#; WeekYrs#USING"Apx Total Payments ########,.## ########,.## ########,._ ##"; ABS(TotalMonthPaid#); ABS(TotalBiWeekPaid#); ABS(TotalWeekPaid#)USING"Apx Total Interest ########,.## ########,.## ########,._ ##"; MonthInterestPaid#; BiWeekInterestPaid#; WeekInterestPaid#DOky$ =INKEY$LOOPWHILEky$ = ""SELECTCASEky$CASECHR$(27):ENDCASEELSE:GOTO CalcENDSELECT' That's ALL--- FMail 0.90 * Origin: Silver Lake Systems * Bothell,WA (1:343/58)

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