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ANALYST.DOC
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1980-01-01
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9KB
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207 lines
* * * * * * * * * * * * * * * * *
* THE HOME FINANCING ANALYST *
* * * * * * * * * * * * * * * * *
(C) Copyright 1983, 1984 -- Ghassan F. Nakad
Overview
--------
The HOME FINANCING ANALYST is a comprehensive real estate evaluation
program written from the perspective of homeowners, potential homeowners, or
renters. It is destined to assist these people as well as real estate agents,
brokers and developers in forecasting and allocating the costs of home
ownership and in comparing ownership versus rental alternatives. It is also
useful in determining if mortgage refinancing is worthwhile. The program,
however, cannot be used to evaluate real estate purchased for investment
purposes, as it does not take into account depreciation charges and rental
income.
The program works with the IBM-PC, compatible systems, and both versions
1.1 and 2.0 of PC-DOS/MS-DOS. Only one disk drive is necessary. The compiled
version requires at least 128 Kb memory, while the non-compiled version
needs 64 Kb. The latter is less efficient and does not have the same degree of
precision as the compiled version (0.01% error detected). Should you run out of
memory in the non-compiled version, the screen will warn you and prompt you to
save your work under a file name. The program will then continue as usual. This
problem does not occur in the compiled version.
Caution
-------
A file with extension "HFA" must always be present on the program disk.
Otherwise you run into trouble.
$$$
---
You are encouraged to copy and distribute this program as long as it is
not done for profit. If you find this program useful, a $15.00 contribution is
requested (less is accepted if all your income is eaten up by your mortgage or
your rent !). Please send your contribution and other correspondence to:
Ghassan F. Nakad
697 Cove Road, Unit 2-J
Stamford, CT 06902
As a registrant you are entitled to an additional copy of the program for
$5.00, one written response to a technical support request and annoucements of
future updates. Whether a registrant or not, your comments will be most
appreciated.
Since I carry no liability insurance I am sorry to inform you that this
program carries no guarantees, warrantees or what have you. If you acquired it
through me, and you are dissatisfied with it, I'll gladly refund your
contribution less $5.00 for shipping, handling and the cost of the diskette,
which will be most probably squeezed and bent in my mail box.
With this in mind, let's talk home financing !
Program Components
------------------
The HOME FINANCING ANALYST provides six separate schedules in a template
format and a worksheet for fast and accurate computation of the effective
mortgage cost (IRR equivalent).
Schedules A & B: These are the Amortization Schedules for the first (A)
and second (B) mortgages, if any. They show for each year
a month by month allocation of the mortgage payments
between principal and interest paid, cumulative principal
and interest paid, and the outstanding mortgage balance.
An annual summary of all these is provided at the bottom
of the template.
Schedules C & D: Provide the same information as above on an after-tax
basis.
Schedule E : This a schedule of the annual net monthly costs of owning
a home, be it a house or a condo. It takes into account
all payments made -- both tax deductible and not. This
includes mortgage payments, common charges of a condo (if
any), insurance, property taxes, etc. based on your
marginal federal tax rate and your marginal or flat
state tax rate (if any). An annual summary is provided.
Schedule F : This last schedule gives a complete picture of the
effective costs of ownership, including such intangibles
as anticipated property appreciation, as well as the
opportunity cost of funds invested (i.e.the down payment)
since a person usually forgoes some income on his/her
savings by investing in a home instead of another saving
or investment instrument. Once the "true" cost of
ownership is established, the program compares it to
renting costs and determines the benefits or costs of
owning as opposed to renting your home. As usual, monthly
and annual information are provided.
Effective Rate
Computation : This option is a sub-program intended to assist in
figuring out the real interest rate on the mortgage given
(a) the mortgage amount; (b) its length; (c) the points
paid up-front; and, (d) the anticipated life of the
mortgage (or how long you intend to keep that mortgage).
Also this sub-program will provide you with the amount
of the monthly payment, total interest paid over the
life, not necessarily the length, of the mortgage and
the balance outstanding (this also corresponds to the
balloon payment).
Operations
----------
The whole program is menu driven and requires no programming skills
whatsoever. Just follow the menus provided on the various screens.
When you first start the program you'll be asked to select one of four
options:
1. Input new data
2. Use data on file
3. Review files on the disk
4. Effective rate computation, etc.
If you are hesitant at first, go directly to option 2 and ask for "SAMPLE"
when you are prompted to input the file name. A second later you'll see the
screen getting filled with data that I've stored for illustration purposes. At
this stage you can do four things: you can continue or return to the original
menu or alternatively you may decide to alter the data in front of you or
input you own data. Either way it's only a push button away.
Should you decide to input your own data all you have to do is answer the
prompts. The program checks every entry as to its consistency and format but it
can't tell if some of the amounts are correct or not. So if you make a mistake
you will be given a chance to make the necessary corrections in a little while.
In fact throughout the program you'll be constantly asked if you wish to review
your assumptions, thus permiting the exploration of various "what if" scenarios.
Every time a change in assumptions is made, you are given a chance to save
the new set of data. This is highly recommended. Make sure however that the
name given to the new file does not exceed eight (8) characters and not to
include any extensions to the name. The program will affix the extension "HFA"
automatically. Although the extension will appear on the screen when you review
the files on the disk, you never need to input it.
After you are given the option to save your data you get to a menu which
asks you which of the schedules { A through F } discussed earlier you wish
to be displayed.
One of the unique features of the HOME FINANCING ANALYST is that it
provides you with the opportunity to move from one schedule to another. Hence,
if you want to see the schedule of the next year you just push "N". If
instead you want to review your assumptions (and possibly change them), you
push "R", etc. Everything on the screen is self-explanatory.
A Note on Computation
---------------------
The computational rules are to be printed and distributed at a later
stage. The trickiest ones are explained here:
Any Net Cost = Any Deductible Cost - Shield
Shield = Pre-tax Deductible Cost X Tax Rate
Tax Rate = Federal Tax Rate + [(1-(Federal Tax Rate)) X State Tax Rate]
Appreciation = (% Expected Appreciation X 0.6)
+ [(1-Tax Rate) X 0.4 X % Expected Appreciation]
Return on Investment = Appreciation / Down Payment
Total Return on Investment = Net Cost or Benefit / Down Payment
That's it for now. Forthcoming enhancements will include (among other things)
variable and stepped-up rate mortgage rates.