Sunday, May 2, 2021

TI-84 Plus CE and Casio fx-CG50: Interest Only Loans

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


All original content copyright, © 2011-2021.  Edward Shore.   Unauthorized use and/or unauthorized distribution for commercial purposes without express and written permission from the author is strictly prohibited.  This blog entry may be distributed for noncommercial purposes, provided that full credit is given to the author. 


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