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# incorrect mortgage calculation

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Hi first time posting to a forum.  I am taking an Investment Analysis course and when I use the HP 10bII to caclulate mortgage payments, interest and principal the answer differs from the course answers?  The course sometimes uses a mortgage factor sheet which generates a different restult /answer.

Any thougts on how or why?

Thank you

Todd

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Hi,

Can you please give some examples with all the data? Then we can try to see what might cause the differences.

Thank you.
-Bart
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Hi,

Thank you for responding I appreciate that.

Example:

Mortgage payment calculation using the Mortgage Payment Factors sheet provided with the online course =

Mort Bal = \$697,000

Int Rate = 7.75%

25 year ammortization period

Mort Factor =  7.473210

Pmnt = \$5,208.83

HP 10bII calculation using the keystrokes provided in the users manual = \$5,230.86

There is a \$22.03 difference per month.

Thanks

Todd

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Message 4 of 14
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@ToddJW wrote:

Hi,

Thank you for responding I appreciate that.

Example:

Mortgage payment calculation using the Mortgage Payment Factors sheet provided with the online course =

Mort Bal = \$697,000

Int Rate = 7.75%

25 year ammortization period

Mort Factor =  7.473210

Pmnt = \$5,208.83

HP 10bII calculation using the keystrokes provided in the users manual = \$5,230.86

There is a \$22.03 difference per month.

Thanks

Todd

Hi,

I see your calculation is for payments at the beginning of the period.

I wanted to compare the 10BII to other tables, but could only find those with end-of-period payments:

Using the data provided, my 10BII gives me a repayment of \$5264.64

Looking at mortgage factors from the site:

http://www.foreclosurephilippines.com/amortization-factors-table/

@their factor for 25yr @7.75% p/y is 0.0075532876 or 7.5532876 per \$1000

using this with \$697,000 results in £5264.64, i.e. the same as the 10BII

Also, other TVM calculators agree with the 10BII for "beginning" mode

So I would say the mortgage factor you have is not quite accurate.

Best regards.

-Bart
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Hi,

Further to this:

TVM formula for payment at end:

PMT = PV *[ 1 / [1-(1+i)^-N] ] * i

Hence the Mortgage Factor is

i / [(1-(1+i)^-N]

where N=number of payments and i=decimal interest per month

which works out to 0.0075532876 or 7.5532876 per \$1000 (confirmed in tables of web page that I previously quoted)

For Beginning Payments:

PMT = PV *[ 1 / [1-(1+i)^-N] ] * i/(1+i)

Hence the Mortgage Factor is

[i/(1+i)] / [1-(1+i)^-N]

For annual Percentage of 7.75% = 0.006458333 decimal per month, and N=300

Mortgage Factor (begin) = 0.007504819 or 7.504819 per \$1000

7.504819 * 697 = \$5230.86  which agrees with the 10BII

Best regards,

Bart

-Bart
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Bart, I agree with your observations that it appears that there's a disconnect between the mortgage factor and the rest of the data, and also that a "begin mode" mortgage computation would be unusual.

I'm also wondering if we're missing a critical piece of information here... is it possible that the interest rate isn't compounded for the same periods that the payments are made?  Something like a Canadian mortgage perhaps?  Though not stated, I'm wondering if a mixed-period situation exists here.

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Thank you Bart for the information.  I agree that the factors provided look off which is odd given that this is a real estate course on finacnial analysis.

Thanks again I appreciate the time you took to help me.

Todd

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It seems that Divid_M ’s suggestion is right.

I am doing the calculations in the Finance app on my Prime, but I have no indication that they are different from the HP 10bII, at least so far I get the same results.

When I change the number of compound payments per year from 12 to 2, I get a Payment of 5208.827 per month, which is in exact agreement with Todd’s result.

I have chosen to pay at the end of periods.

So what I am doing is to change the effective interest, when 7.75 is the nominal interest.

Number of payments I have set to 300 and Payments per year to 12.

This possibility of adjusting the number of compound payments per year is something the Prime offers, as far as I know it is not as easy in the HP 10bII

Nevertheless is seems unlogical to me to pay each month, when interest calculations are only done once in 6 months.

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@Jan_D wrote:

This possibility of adjusting the number of compound payments per year is something the Prime offers, as far as I know it is not as easy in the HP 10bII

Nevertheless is seems unlogical to me to pay each month, when interest calculations are only done once in 6 months.

The part in blue above is actually the norm for Canadian mortgages as I understand it.

I don't have a 10bii to verify this on, but there's a specific mention of computing the Canadian Mortgage Factor on page 105 of the (English) 10bii User's Guide.  You essentially have to convert the interest rate first, then proceed as normal with the rest of the entries.  The 10bii has some special functions to help with this.

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I just checked it in the User's Guide.

You are right.

Thank you.

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