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- The Optional Payment Program
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- Purpose of Program
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- The purpose of the program is to illustrate the return on investment that
- can be obtained from "investing" additional principal in your mortgage
- payment on a monthly basis.
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- As the "Mortgage Interest Reduction Consultants" I and some friends tried
- several methods to use this program in a mail order business. But, we were
- not successful in generating a reasonable number of replies to our mailing.
- We offered, with version 1 of this program, to show holders of year-old
- mortgages how to save thousands of dollars on their mortgages; no response
- even when we offered the service for free. Then I produced this version
- and we offered to show "investors" how to get at least a 12% return on
- their money; again with an inadequate response. I wonder how those who buy
- in to a high priced mortgage reduction business opportunity are doing after
- a few months.
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- So I now offer this program for private, non-commercial use.
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- Computer Program Description
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- This computer program is used to calculate mortgage amortization schedules
- for traditional minimum monthly payments and for constant optional payments
- of a fixed amount of additional principal. The amortization schedules are
- used to generate both tabular and graphic displays of equity and interest
- payments that compare traditional minimum payments with optional extra
- payment schedules.
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- The initial screen shows the name of the program and copyright information.
- This screen will invert every 2 seconds. Press ENTER to get to the input
- screen.
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- The input screen requests information about the mortgage. It also requests
- some information that is used on a cover sheet. Included in the items
- requested are:
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- Original Mortgage Balance
- Term of Loan (in months, usually 360 for 30 years, or 240 for 20 years)
- Interest Rate (%, for example 10.5)
- Monthly Payment (computed Principal and Interest payment, not changeable)
- Number of Payments Made
- Outstanding Balance (computed from above information, able to be changed)
- Date of Next Payment
- Client's Name (for cover page)
- Street Address (for cover page)
- Optional Additional Payment (amount credited monthly to Principal)
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- You type the information requested at each point. Press either the ENTER
- key or the TAB key to progress to the next item. Any errors or values out
- of range are noted and you are given another opportunity to enter correct
- data.
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- After you enter the Original Mortgage Balance, the Term of Loan, and the
- Interest Rate, the program calculates the "minimum" monthly Principal and
- Interest payment. This is displayed and cannot be altered.
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- You must compute from the date of the mortgage to the current date the
- number of payments already made. Enter this number for the Number of
- Payments Made.
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- The program then computes the Outstanding Balance. This is based upon the
- number of payments made assuming that traditional minimum payments have
- been made. If additional principal has been paid, then the actual mortgage
- balance will be lower. If you know that the actual balance is lower, you
- may enter that balance, replacing the calculated balance. Otherwise press
- ENTER or TAB to go on to the next field.
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- The Date of Next Payment is used to specify the dates of subsequent
- payments in the amortization schedules.
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- The name and street address are displayed on a cover page that indicates
- that this calculation is made for (name) for home at (street address).
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- The Optional Additional Payment is the dollar amount of the constant
- additional principal payment that you will include in subsequent mortgage
- payments. This is used to compute a new amortization schedule.
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- After these items are successfully entered you are presented with a second
- menu. This second menu allows the selection of display options. These
- choices present the calculated amortization information in various formats.
- Two other options provide for printer control and for entering new data.
- The options on this second menu are:
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- Display Cover Sheet (plan prepared especially for ...)
- Explain Optional Payments (2 pages of explanation)
- Graph Home Equity Increases (compares traditional and optional graphs)
- Annual Table of Loan Balances
- Annual Table of Equity Balances
- Graph of Interest Payments (compares traditional and optional graphs)
- Monthly and Optional Details (compares traditional and optional plans)
- Summary (overall summary showing advantages of optional payment plan)
- Amortization Schedules
- Enter New Data
- Exit
- Send Form Feed to Printer
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- The first option, Display Cover Sheet, will display the name and address of
- the client for whom the schedules are being generated. This should be
- printed using the "Print Screen" key.
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- The Explain Optional Payments option displays two pages of information.
- The first page explains WHY you should follow the optional payment
- schedule. This section uses dollar amounts that pertain to your own
- mortgage and illustrates the savings you personally could achieve. The
- second page discusses HOW to start your optional payment program.
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- The Graph Home Equity Increases option displays a graph showing Equity
- verses Time. It shows a line for both the traditional minimum payment
- schedule and for the optional payment plan. It shows the equity remaining
- in the traditional approach when the option payment plan has paid off the
- mortgage. This should be transferred to the printer using the "Print
- Screen" key.
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- The Annual Table of Loan Balances allows the printing of comparison data on
- either the screen or the printer. It shows on a monthly basis the
- advantage of the optional payment plan over the traditional minimum payment
- plan.
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- The Annual Table of Equity Balances is similar to the above option except
- that the values shown are the total equity increases for both payment
- methods.
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- The Graph of Interest Payments shows a line for both the traditional
- minimum payment schedule and for the optional payment plan. This should be
- transferred to the printer using the "Print Screen" key.
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- The Monthly and Optional Details compares the tradition and optional plans
- on a month by month basis. It can be displayed on either the screen or
- sent to the printer.
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- The Summary option begins by asking for a rate of return you could safely
- achieve by investing money yourself. This rate of return is used in
- calculating the "present value" of the income flow your extra payments free
- up after your home is paid off. The summary shows the initial data used in
- the calculations and shows the amount of interest paid during both plans
- and the equity obtained under both plans after either 5 or 10 years of
- payments. It provides a personalized explanation of the benefits of using
- the optional payment plan, including the advantage of paying your home off
- early, saving money on interest charges, increasing equity after 5 or 10
- years, and annualized rate of return.
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- The Amortization Schedules option displays complete amortization schedules
- for both the traditional and optional plans. It allows you to display the
- schedules on the screen or send them to the printer.
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- You may also select to Enter New Data to create a new series of mortgage
- analysis.
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- The Exit option returns to DOS.
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- The Send Form Feed to Printer adjusts the printer to the top of a new page.
- This command should be used after each use of the PrintScreen key.
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- The displays presented by the second menu are meant to be printed on an
- attached printer. After selecting "non-graphic" options you are asked if
- you want the output routed to the screen or to a printer. Graphs and the
- cover sheet can be printed via the "PrintScreen" key.
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- Except for the schedules and the explanation options, the information
- presented uses the graphic capability of the PC. It is meant to be
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- displayed in "larger" format for presentation to clients. In order to send
- this information from the graphics screen to the printer, you should issue
- the following command BEFORE using this program:
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- GRAPHICS
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- This command will load the graphics driver that will allow a graphics
- screen to be sent to the printer with the "PrintScreen" key is pressed. If
- the GRAPHICS command has not been issued prior to using this program you
- will seen garbage being printed when you press the PrintScreen key.
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- What About Re-Financing Your Mortgage?
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- You need to consider two important factors in re-financing your current
- mortgage. The first factor to consider is the cost of re-financing. The
- second factor is the overall savings.
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- The cost you pay will include points, appraisal fees, inspection fees, loan
- origination fees, and so on. You will probably pay all the fees and other
- costs that were included with your current mortgage. Look them up in the
- paperwork you got with your current mortgage. Some costs may be less
- because you will probably borrow less (unless you want to use the equity
- you have built up because of your principal payments as well as the
- increase in value of your home over the years).
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- Most any mortgage company can go over their fees and other costs with you.
- Be sure you know the costs before you decide to re-finance.
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- You need to know the terms of your new mortgage. Consider the following
- details:
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- The interest rate of the new mortgage
- The term in years of the new mortgage
- The minimum monthly or bi-weekly payments you MUST make
- The length of time you expect to remain in your home before selling
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- Now run this program using the details of your old mortgage. Include the
- amount you believe you would like to add to your payment as additional
- principal. Note the total amount you will pay as Principal and Interest
- plus the additional principal payments. Determine how much equity your
- payments will add to your home AT THE TIME YOU EXPECT TO SELL.
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- Run this program again using the details of your proposed new mortgage.
- Use the same total payment (Principal and Interest plus additional
- principal) amount you used before. If your new mortgage is a true bi-
- weekly mortgage, use 1/12'th of your annual Principal and Interest total
- for the monthly Principal and Interest value; this will give you results
- very close to the true bi-weekly values. Determine how much equity your
- payments will add to your home AT THE TIME YOU EXPECT TO SELL. Now,
- SUBTRACT the cost of obtaining the new mortgage from this added equity.
- This amount represents your increase in value for the new mortgage.
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- Compare the two figures you get for added equity from both your current
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- mortgage and your proposed new mortgage. Choose the option which produces
- the greatest increase.
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- Registration
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- If you find this program useful you should register the program.
- Registration costs only $25. Please fill out the registeration form below.
- If you have found any errors or wish to have any enhancements made, please
- indicate that on this form. I am interested in producing enhancements and
- will provide you with one free update when one is made. Mail your
- registeration and the form to:
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- ╔══════════════════════════════════════════════════════════════════════╗
- ║ Send $25 Registeration fee to: ║
- ║ ║
- ║ Robert Sherman MORTOPT ║
- ║ Box 69002 ║
- ║ Pleasant Ridge, MI 48069 ║
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- ║ Name:_________________________________________________________ ║
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- ║ Address:______________________________________________________ ║
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- ║ City:_______________________________ State:_____ ZIP:_________ ║
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- ║ Suggestions for Improvement:__________________________________ ║
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- ║ ______________________________________________________________ ║
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- ║ ERRORS:_______________________________________________________ ║
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