Saturday, January 22, 2022

HP 17BII+: Prorated Mortgage Interest and Prorated Property Tax

 HP 17BII+:   Prorated Mortgage Interest and Prorated Property Tax

Both formulas presented today are from Michael C. Thomsett's book, The Real Estate Investor's Pocket Calculator.  This book is excellent for real estate and financial mathematics.  Refer to the source section below.  The formulas are adopted for the HP 17B, 19B, and 27S families.

The follow formulas deal with prorated interest and property tax when property is sold.

Prorated Mortgage Interest


Calculate the amount of mortgage interest the buyer must pay upfront prior to the first payment of the mortgage.  

Solver Formula - HP 17BII+:

PROINT=LOAN×I%÷1200×PER÷MO


Variables:

PROINT:  prorated interest
LOAN:  mortgage amount
I%:  annual interest
PER:  number of days until 1st month the mortgage starts
MO: number of days in the month prior to when the mortgage starts

Example:

A mortgage closed on March 12, 2021, with the first mortgage month beginning April 1, 2021.  The mortgage is for $179,000 for 30 years (360 payments) at 2.76%.   What is the prorated interest the buyer must pay at closing?

LOAN:  179,000
I%: 2.76
PER:  19   (19 days until March 31, 2021)
MO:  31   (31 days in March 2021)

Result:   PROINT = 252.33

Prorated Property Tax

The formula calculates the prorated property tax the seller must pay when the mortgage is signed.  Often the property tax is assessed semi-annually.  

Solver Formula - HP 17BII+:


PROTAX=(DDAYS(BGN:SALE:1)+1)÷(DDAYS(BGN:END:1)+1)×$BILL

Variables:

PROTAX:  prorated property tax
BGN:  first day of the tax period
END:  last day of the tax period
SALE:  day when the mortgage closed
$BILL:  amount of the property tax

Example:  

Let's take the same scenario above, with the sale date of March 12, 2021.   The property tax for period January 1 to June 30, 2021 is $1,190.   

$BILL:  1,190
BGN:  1.012021  (MM.DDYYY format)
END:  6.302021
SALE:  3.122021

Result:  PROTAX = 466.80

Source

Thomas, Michael C. The Real Estate Investor's Pocket Calculator 2nd Edition.  AMACOM.  American Management Association:  New York. 2018  ISBN 9780814438893

All original content copyright, © 2011-2022.  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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