Loadstar 128 #17/q17.d81/t.home ref

Text File | 1990-01-01 | 7.8 KB | 160 lines

                        H O M E    R E F I N A N C E R

                               by Fender Tucker


     If you bought your house during the Reagan reign, you probably bought
it at a two-digit interest rate, maybe even as high as 13 percent on a
thirty-year loan.  At the time it seemed like a good idea, and it probably
was.  Owning one's home is the American dream, right?  But if you are still
paying that high interest rate on your mortgage, you may be missing a major
bet.  These days the going interest rate on thirty-year loans is around 8 or
9 percent.  It may be time for you to consider refinancing your loan.

     HOME REFINANCER will help you make that decision.  It's a "what if"
type of program.  You enter the data for your present loan and then the data
for a refinanced loan.  The program will do all of the calculations and show
you a side-by-side comparison of the two loans.  The new loan will cost some
money up-front, of course, but the program takes this into consideration and
shows you how many months it will take before you break even.  If you plan
on staying in your present home for longer than that, you should consider
refinancing.

     First, a disclaimer.  Al Vekovius, the Grand Exalted Mojo of Softdisk,
went to a seminar about home refinancing and came back with a nifty
spreadsheet program that does exactly what HOME REFINANCER does.  From Al's
specs, I wrote this program.  While we cannot be held responsible for your
home financing decisions, you can rest assured that this program was
designed by a knowledgeable, type-A, money-conscious kind of guy -- Al.  It
was coded by a guy who never buys anything until he can pay for it in cash -
me.  I am not a home owner type.

     This is not a tutorial on mortgages.  It is assumed that you are paying
on your home loan and are reasonably familiar with how home financing works.
Interest rates and points are to be entered as decimal numbers.  If the rate
is 8.4%, enter 8.4, not .084.  If the points are 3, enter 3, not .03.


THE MAIN SCREEN
---------------

     The program holds all of the information on one screen.  I chose a
color-coded scheme to keep all of the related data together.  There is a
help screen that explains what information is to be entered into which
colored area.  All ten of the fields that you are to enter data into are
black.  All other fields are grey, and are calculated fields -- the computer
will fill in these fields.

     There are five options at the bottom of the screen: LOAD, SAVE, PRINT,
HELP and QUIT.  These are accessed by typing the first letter of the
command.  When you have all of the information entered for a particular
scenario, choose SAVE and all of the data will be saved in a filename of
your choice.  When you choose LOAD, a directory of saved files (prefixed by
"hr.") will be shown on the screen.  Move the highlight bar to the file you
want and press RETURN.  The data will be loaded onto the main screen, wiping
out any data that's currently showing.  Make sure you save any scenario
that's important before LOADing another.

     PRINT will simply print the screen.  Since every field is clearly
labeled, this printout is the most concise way to show all of the details of
a particular scenario.  The HELP screen can also be printed.

ENTERING DATA
-------------

     The black fields are those that you can enter data into.  Move the
white highlight bar to the field you want to enter and start typing the
number.  You do not have to press RETURN before the number, just after.  The
fields will be formatted for dollars and cents, percentages (up to three
decimal places), and months (whole numbers).

  EXISTING MORTGAGE - RED

      Where does the data come from?  The red area comes from your mortgage
payment booklet.  You need to enter:

 (a) your monthly payment
 (b) your loan's interest rate
 (c) how many months are left to pay.

The remaining principal is the amount due on your house, not counting the
interest you'll pay.  As you'll see, interest far outweighs the principal
when you extend a loan out over many years.

   NEW MORTGAGE - CYAN

     The remaining principal from the red area is placed in the "Amount of
Loan" field in the cyan area.  This area is the data for a proposed new
loan. You get this information by guessing, reading up on current rates, or
better yet, calling a mortgage company and asking them what the current
rates are.  Enter the new rate (which should be much lower than the rate in
the red area) and the number of months you will take the new loan for.

     The main reason for refinancing may be to lower your monthly payment.
In this case, you can extend the loan for the full thirty years and see a
big reduction in your monthly payment.  But you may want to refinance in
order to pay off the loan earlier.  In this case, your monthly payment may
not go down -- it may even go up! -- but the loan is paid off much more
quickly.  What WILL go down drastically is the amount of INTEREST you pay.
HOME REFINANCER will probably be a real shocker to you when it shows just
how little of your money is going towards the principal and how much is
going towards interest.

     The cyan area is where you will be doing most of your "what if"
entries. You may want to borrow more (or less) than the exact amount needed
to pay off your current loan.  The "Amount of loan" field is filled in with
the same amount as the "Remaining principal" field in the red area by
default, but you can change it if you want to borrow more or less than the
default.

   CLOSING COSTS - PURPLE

     When you deal with lawyers or mortgage companies it costs money.
You'll have to check with one of them to get close to actual amounts to
enter in the purple area's fields.  "Points" are percentage "fees" charged
to you based upon the amount of the loan.  If you pay points, you often get
a better interest rate on the loan.  "Closing costs" are estimated fees that
must be paid to refinance.  Get this information from your mortgage company.
 On an average house the closing costs can run about 5% of the total price.

     The "Opportunity rate" is an interest rate that represents the rate
you'll have to pay in order to obtain the money to cover the closing costs.
If you take the money from a savings account or some interest-bearing
account, then the Opportunity rate is the rate you are getting on your
investment in this account.

   REFINANCING SUMMARY - GREEN

     This area is where you can see the two loans compared side-by-side.
The main points of interest are the amounts that go towards interest and the
reduction in your monthly payment.  The "Months to breakeven" shows how long
it will take to recover the costs of refinancing (closing costs + points) at
the rate you entered in the Opportunity rate field.

   LOAN COMPARISON - BLUE

     This area shows you what the two situations would look like X months in
the future.  A good number to enter into the "Number of months" field is the
estimated number of months you plan to live in your current house.  If you
anticipate moving anytime soon, this will affect your decision to refinance.

BOTTOM LINE
-----------

     Refinancing is not something you want to do on the spur of the moment.
Your mortgage company should be happy to work with you since they will be
making money on the closing costs.  There's nothing they can do about low
interest rates so they will probably want to keep your business even though
you wial ba paying them less in the long run.  Ask them for any figures you
need to plug in this program.  Try different scenarios then save and print
them.  Saving thousands of dollars in interest is nothing to sneeze at.

     If you find that now is the time for you to refinance your house, we
wish you the best.  We hope you save enough to renew your LOADSTAR
subscription and drop us a happy line.

FT

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