TI-84 Plus CE and Casio fx-CG50: Interest Only Loans
Interest Only Loan: Is it a Good Idea?
An interest-only loan is a loan where you pay only the interest of a loan, at least for a certain amount of time. Why would some one want to engage an interest only loan? The payment for when you are paying just the interest is lower. However, the principal does not go down during that time, and the principal of the loan is going to have to be paid sometime.
Interest only loans can be helpful for people who expect a large increase of income in the near future or for those who like to flip properties. Personally, I don't recommend it, when I take a loan, I want to pay off a portion of the principal each payment.
The programs presented here will calculate:
* The payment during the interest only term
* The remaining payment when principal starts becoming due
* The total cash outflow with the total interest paid, which will definitely be higher than the traditional route
Inputs:
* INTEREST YEARS?: The number of years where a loaner pays only interest. Assume that the interest only payments occur at the beginning of the loan.
* PRINCIPAL YEARS?: The number of years where principal is paid.
Example: For a 5/25 loan:
INTEREST YEARS = 5
PRINCIPAL YEARS = 25
* INTEREST RATE: The annual interest rate of a loan
* PV: Amount of the loan (present value)
The calculation assumes that there is no balloon payment (FV = 0).
TI-84 Plus Program: INTONLY
"EWS 2021-03-13"
ClrHome
Disp "INTEREST ONLY LOAN"
Input "INTEREST YEARS? ",T
Input "PRINCIPAL YEARS? ",Y
Input "INTEREST RATE? ",R
Input "PV? ",P
P*R/1200→U
-tvm_Pmt(12Y,R,P,0,12,12)→V
Disp "INT ONLY PMT:",U
Disp "REMAINING PMT:",V
Pause
12(T*U+Y*V)→W
W-P→X
Disp "TOTAL PMTS:",W
Disp "TOTAL INTEREST:",X
Casio fx-CG50 Program: INTONLY
"EWS 2021-03-14"
ClrText
"INTEREST ONLY LOAN"
"INTEREST YEARS"?->T
"PRINCIPAL YEARS"?->Y
"INTEREST RATE"?->R
"PV"?->P
P*R/1200->U
(-)Cmpd_PMT(12Y,R,P,0,12,12)->V
"INT ONLY PMT:"
U ⊿
"REMAINING PMT:"
V ⊿
12(T*U+Y*V)->W
W-P->X
"TOTAL PMTS:"
W ⊿
"TOTAL INTEREST:"
X
Example
5/30 4% interest rate only. Loan amount $250,000
INTEREST YEARS: 5
PRINCIPAL YEARS: 30
INTEREST RATE: 4
PV: 250000
Results:
INT ONLY PMT: 833.3333333
REAMINING PMT: 1193.538239
TOTAL PMTS: 479673.7659
TOTAL INTEREST: 229673.7659
Source:
Kapfidze, Tendayi "What Is an Interest-Only Mortgage and How Does It Work?" Edited by Deborah Kearns LendingTree. LendingTree, LLC, Charlotte, NC: 2021. https://www.lendingtree.com/home/mortgage/interest-only-mortgages/ Retrieved 9, 2021
Eddie
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